Bank of America, GE, Disney, Freddie Mac, PepsiCo, Aetna, Textron among issuers on another solid day

By Andrea Heisinger and Paul Deckelman

Omaha, Nov. 29 - The high volume continued Thursday with Bank of America Corp., General Electric Co., Southwestern Electric Power Co., Walt Disney Co., Freddie Mac, PepsiCo Inc., Aetna Inc., Textron Inc., New York State Electric & Gas Corp., Georgia Power Co. and Marks & Spencer pricing new issues.

"It really felt like a continuation from yesterday," a market source said. About $8.2 billion in new issues priced Wednesday, compared with the more than $17.7 billion Thursday.

With another cascade of new deals hitting the primary market Thursday, the focus in the secondary realm, once again, was on trading in the new issues such as Bank of America and General Electric rather than in established bonds. However with the stock market content to follow the explosive rallies Tuesday and Wednesday with only modest gains Thursday, there was less trading impetus, and overall market volume was off about 19% from levels seen the day before. Advancing issues beat decliners by about a seven-to-five margin.

Freddie sells preferreds

Several large deals contributed to the substantial new issue total.

Freddie Mac sold $6 billion in fixed to floating rate non-convertible non-cumulative perpetual preferred stock.

The shares are priced at $25 each and pay a dividend of 8.375% for five years. Then they switch to a floating rate of the greater of three-month Libor plus 416 basis points or 7.875%.

The issue was "trading up on the break," said a source close to the deal.

"It went very well," the source said. "It was heavily oversubscribed and allocations reflect that."

Although the issue was run off the high-grade desk and most investors were high-grade accounts, there were quite a few high-yield names in the book, the source said.

Bookrunners were Lehman Brothers and Goldman Sachs.

GE brings $4 billion

General Electric priced $4 billion in 5.25% 10-year global notes at 99.195 to yield 5.355% at a spread of Treasuries plus 140 bps. Citigroup, J.P. Morgan, Lehman Brothers and Morgan Stanley ran the books.

Another chunk of the day's issue volume came from Bank of America with $3.5 billion in 5.7% 10-year senior notes priced at 99.297 or a spread of Treasuries plus 190 bps. Banc of America was sole bookrunner.

PepsiCo priced $1 billion in 4.65% five-year senior notes at 99.908 to yield 4.667% at a spread of Treasuries plus 128 bps. Morgan Stanley, Merrill Lynch and UBS were bookrunners.

Health insurer Aetna priced $700 million in 6.75% 30-year senior notes at 99.322 to yield 6.803% at a spread of Treasuries plus 245 bps. This was equal to price talk.

Goldman Sachs and Morgan Stanley ran the books.

Textron priced $350 million in 5.6% 10-year notes at 99.993 to yield 5.601% at a spread of Treasuries plus 165 bps, in line with price talk.

Bookrunners were Banc of America, Citigroup and Goldman Sachs.

British retailer Marks & Spencer priced $800 million in two tranches of 10 and 30-year notes via Citigroup, Morgan Stanley and RBS Greenwich Capital Markets.

The $500 million tranche of 6.25% 10-year notes priced at 99.343 to yield 6.34% at a spread of Treasuries plus 240 bps.

The $300 million tranche of 7.125% 30-year notes priced at 98.577 to yield 7.242% at a spread of Treasuries plus 290 bps.

New York State Electric & Gas priced $200 million of 6.15% 10-year notes at 99.879 to yield 6.166% at a spread of Treasuries plus 225 bps. Banc of America, J.P. Morgan and UBS Investment Bank were bookrunners.

Disney, Southwestern increased

Issues from Disney and Southwestern Electric were upsized.

The issue from Disney was increased from $350 million to $750 million of 4.7% five-year notes priced at 99.772 to yield 4.752% at a spread of Treasuries plus 135 bps, in line with price talk.

Bookrunners were Banc of America, Deutsche Bank and Merrill Lynch.

Southwestern Electric increased its issue from $250 million to $300 million of 5.875% 10-year notes priced at 99.636 to yield 5.919% at a spread of Treasuries plus 200 bps.

Citigroup, Merrill Lynch, Morgan Stanley, UBS and Wachovia were bookrunners.

Georgia Power priced a $100 million issue of 6.05% 30-year senior monthly notes via Edward Jones.

Barclays to sell Friday

An issue of preference shares from Barclays Bank plc announced Wednesday will price Friday, an informed source said.

Bookrunners are Barclays, Citigroup, UBS Investment Bank and Wachovia.

The pace will likely slow Friday, as is typical for the end of the week, but there will still be a handful of deals, market sources said.

Thursday's tone was "very good," one source said.

"We had a bigger volume purely by the fact that Bank of America and GE priced their issues," he said.

"There was also a Treasury market rally and nothing really bad happened overnight."

Much of the market was focused on new issues, meaning there was little secondary trading, a source said.

"It was pretty cut and dry today, really," he said. "We have way over $10 billion today but it's all being absorbed. Talk about people looking for a window [to issue]."

The backlog of issues from recent volatility is not over, but will likely be shelved until early next week, sources said, with a little coming out Friday.

"We'll see some of it maybe as early as Monday, but you'll see it start back up on Tuesday," a source said.

A small amount of weakness firmed up Thursday, leaving the window open for issuers, a market source said.

"Unless things are a total wreck going into tomorrow, it will slow down but we're still going to see a handful of deals," he said.

B of A, GE gain in trading

In the secondary arena, a trader saw the new Bank of America 10-year notes tighten to 184 bps bid, 180 bps offered over Treasuries from their 190 bps issue price.

He also saw GE's new 5¼% 10-years narrow to 133 bps bid, 130 bps offered from their 140 bps issue price.

The trader said that he didn't see any aftermarket activity in some of the new names, such as Aetna Inc.'s 6¾% notes due 2037.

Among the issues which priced on Wednesday, he saw the new Manufacturers & Traders Trust Co. 6 5/8% notes due 2017 at 263 bps bid, 258 bps offered, straddling their 262.5 bps issue price.

A trader at another desk saw the new DuPont 5% notes due 2013 at 147 bps bid, 144 bps offered, about where they had left off on Wednesday and tighter than their 158 bps issue price earlier Wednesday.

He also saw the new Freddie Mac 8 3/8% non-convertible, non-cumulative perpetual preferreds at 25.5-25.625, up from their $25 issue price.

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