GECC, Berkshire Hathaway, Prudential, National Australia Bank among issuers on volatile Tuesday

By Andrea Heisinger and Paul Deckelman

Omaha, Jan. 8 - General Electric Capital Corp., Berkshire Hathaway Finance Corp., National Australia Bank, Buckeye Partners, LP, Prudential Financial Inc. and Alabama Power Co. were among issuers Tuesday braving the market as conditions became increasingly negative.

In the investment-grade secondary market Tuesday, advancing issues held only a slight lead over decliners, while overall market activity - reflected in dollar volume - climbed about 31% from Monday's levels.

With several new deals having recently come to market, Buckeye Partners' new paper firmed modestly in aftermarket dealings, as did the new bonds priced by Duke Energy Carolinas on Monday.

Embarq Corp.'s bonds were seen a little wider than recent levels.

Countrywide Financial Corp.'s nominally still-investment-grade rated bonds were seen having fallen sharply Tuesday on bankruptcy rumors, although it should be noted that they are now trading at junk-like or even distressed levels.

GE brings $6 billion

In primary news, General Electric priced $6 billion in two tranches.

The $2 billion of five-year notes was a reopening of the 5.25% notes originally priced Oct. 16, 2007.

They priced at 102.948 to yield 4.553% at a spread of Treasuries plus 145 basis points.

Total issue size is now $4.5 billion.

The $4 billion tranche of 5.875% 30-year notes priced at 98.599 to yield 5.976% at a spread of Treasuries plus 165 bps.

Both tranches priced in line with guidance, a source close to the issue said.

Goldman Sachs & Co., J.P. Morgan Securities Inc. and Lehman Brothers Inc. were bookrunners.

"I would imagine they had this deal mostly done yesterday," a market source said. "It moved along pretty quickly today for its size."

The source estimated the new issue premium on the five-year tranche was in the 7 to 10 bps range, while the 30-year tranche had about a 20 bps premium.

Another AAA: Berkshire Hathaway

Berkshire Hathaway priced $2 billion of notes in two tranches in a Rule 144A offering.

The $1.5 billion tranche of three-year floaters priced at par to yield three-month Libor plus 30 bps.

The $500 million tranche of 4.5% five-year notes priced at 99.897 to yield 4.523% at a spread of Treasuries plus 135 bps.

Bookrunner was Goldman Sachs & Co.

Both issues came into the market at just the right time, said a source close to both deals.

"We got them done in time, and it helped they were both AAA issuers," the source said. "Obviously things ended pretty negatively today."

Wednesday's issuance uncertain

Negative headlines about recession and jobs hit other markets and made its way to the investment-grade bond market by the end of the day.

"I think this will affect the issuers we thought would come tomorrow," a source said. "We'll have to wait and see."

On Monday, sources predicted a heavy volume Wednesday and Thursday.

Other companies priced issues in the market earlier in the day.

Buckeye Partners priced $300 million of 6.05% 10-year senior notes at par to yield 6.05% at a spread of Treasuries plus 220 bps.

Bookrunners were Lehman Brothers Inc. and SunTrust Robinson Humphrey.

Prudential increased its issue to $600 million from $500 million.

The 5.15% five-year medium-term notes priced at 99.905 to yield 5.175% at a spread of Treasuries plus 200 bps.

Merrill Lynch, Pierce, Fenner & Smith Inc. and Wachovia Capital Markets LLC were bookrunners.

Alabama Power reopened its 4.85% five-year notes to add $300 million.

The notes priced at 100.542 to yield 4.724% at a spread of Treasuries plus 153 bps.

Total issuance sits at $500 million including $200 million priced Dec. 4, 2007.

Barclays Capital Inc. and J.P. Morgan were bookrunners.

Another extendible floater

National Australia Bank priced $3 billion six-year extendible floating-rate notes in a Rule 144A deal.

They have a coupon of Libor plus 21 bps for the first year, and mature with a coupon of Libor plus 28 bps.

Initial maturity is Feb. 6, 2009, and final maturity is Feb. 6, 2014.

Morgan Stanley & Co. Inc. was bookrunner.

"We're looking at several billion in issues today, but I'm assuming they're all getting absorbed right away," a source said.

"Those GE numbers will get others in the market. It seems like they were all in and out pretty quickly today."

Financials mixed

A trader said that with the market focused on Countrywide's latest problems "a lot of what went on was mainly financial."

While some of the financial paper managed to hold its own - a market source saw JP Morgan's 6.95% bonds due 2036 having tightened almost 10 points on the session to 279 bid, while Morgan Stanley's 5.05% notes due 2011 narrowed about the same amount to the 155 bps level - other financial paper was in retreat, with Goldman Sachs' 5.125% notes due 2015 some 15 bps wider and GE Capital's 6.75% paper due 2032 more than 20 bps out, both at 145 bps.

Buckeye, Duke better

Elsewhere, the first trader said that Buckeye's 6.05% notes due 2018 "tightened a little bit" to 215 bps over from their 220 bps issue spread, "but nothing drastic."

Also tightening were the 10-year and 30-year bonds issued Monday by Duke Energy.

The trader saw the 5.25% notes due 2018, which priced at 145 bps over, trading at 142 bps bid, 139 bps offered on Tuesday. Its 6% bonds due 2038, which priced at 165 bps over, narrowed slightly to 160 bps bid, 158 bps offered.

However, he also saw the South Carolina Electric & Gas 6.05% bonds due 2038, which priced Monday at 172 bps over, continued to hover Tuesday at 172 bps bid, 168 bps offered, "so that really didn't knock any doors off."

Sprint, Embarq wider

Elsewhere, he said, despite bad news for AT&T Inc. in the equity market - its shares retreated as the phone giant reported softness in its consumer business - "I didn't see a single market in its bonds. That was more of an equity lead story." Ironically, a big mover in the telecoms sector was Sprint Capital, whose 6.875% bonds due 2028 ballooned out by about 25 bps Tuesday to the 320 mark.

There was some active dealing in another phone name, Embarq. The trader saw its 7.082% bonds due 2016 at 277 bps bid, 272 bps offered, "a little wider" than recent levels; it began the new year on Jan. 3 at 264 bps bid, 245 bps offered. The company's 2013 bonds were meantime seen offered Tuesday at 260 bps while its 2036 paper was pegged around 355 bps bid.

Countrywide calamity roils market

One of the biggest losers, in active dealings, was Countrywide, whose bonds and shares headed southward as renewed bankruptcy speculation swirled around the controversial company.

Despite their nominally investment-grade rating, the bonds now are quoted in dollar prices like any other distressed junk bonds, rather than on a spread basis.

A distressed trader said he had started watching Countrywide's bonds just that day, quoting the 6¼% notes due 2016 at 44 bid, 46 offered, well down from prior levels around 51 bid, while its 3¼% notes due 2008 dropped to 83.5 bid, 84.5 offered from levels near 90 on Monday. Its 5.80% notes due 2012 fell to 63.5 bid, 64.5 offered from 66, while its floating-rate notes coming due in May of this year were at 81.5 bid, 83.5 offered, down from levels near 90.

Another trader said Countrywide got "decimated," while a third said that "got crushed," the 31/4s down 6 points at 81.5 bid, 83.5 offered, the 61/4s at 44 bid, 46 offered, down 7, while its 5 5/8% notes due 2009 lost 6 points to end at 62.5 bid, 64.5 offered.

Countrywide's New York Stock Exchange-traded shares, meantime, plunged $2.09, or 27.4%, to $5.55, their lowest close in more than a decade. At one point, the shares were down more than 30%, matching the lows they hit in October 1987, when Wall Street suffered one of its largest one-day drops ever.

In the credit-default swaps market, the cost of protecting Countrywide debt against an event of default such as a bankruptcy widened out to 500 basis points plus 30% up front, seen as a sign that many players in that market fully expect such an event soon. On Monday, those CDS contracts had been trading at 500 bps plus 20% up-front money.

Bank, brokerage CDS wider

Elsewhere in the CDS market, a trader saw most major brokerage CDS contracts about 10 bps wider versus Monday's levels, though Bear Stearns - roiled by speculation about possible management changes - was out 20 bps at 230 bps bid, 240 bps offered.

Among the bank names, most were 2 bps to 6 bps wider - but troubled Washington Mutual gapped out by "60 to 70 bps wider" at 525 bps bid, 555 bps offered.

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