American Tower prices wide to talk; week's issuance uncertain; Morgan Stanley paper gaps out

By Andrea Heisinger and Cristal Cody

New York, Oct. 3 - Equities took a tumble in Asia and Europe overnight, leading to a lack of new investment-grade bond deals on Monday.

There was a $500 million split-rated sale of 10-year notes from American Tower Corp. The deal was announced at benchmark size - or a minimum of $500 million - and the company opted not to upsize, a source said.

Sentiment out of the euro zone, including continuing headlines on Greece, led to a dismal open to the week. Any issuers pricing paper at the moment are doing so because they need the financing, and not opportunistically, one source said.

"It's getting so you can't even guess what's going to happen until the open," the source said.

There could be more deals on Tuesday, Wednesday or Thursday, but only if there are some optimistic headlines and equities rebound, a syndicate source said.

"We've taken a couple of calls, but no one's going to say anything's for sure," he said.

Secondary spreads widened and confidence in corporate bonds lessened on Monday in the uncertainty of the European debt markets. The Markit CDX Series 17 North American high-grade index eased 6 basis points to a spread of 150 bps.

"Financials are 20 to 30 basis points wider, and Morgan Stanley was the weakest one," a trader said.

Morgan Stanley's paper widened 50 to 65 basis points in the secondary market on Monday, traders said.

Investment-grade bank and brokerage credit default swaps costs rose sharply on Monday, indicating a slide in investor confidence in the financial sector, a trader said.

Overall trading volume dropped to about $9.4 billion on the day.

Also in the secondary market, bonds from Sprint Nextel Corp., AT&T, Inc. and other telecom companies widened 5 bps to 10 bps, a trader said.

"Sprint paper in particular is down about 4 points," the trader said.

In other trading, CenturyLink, Inc.'s split-rated bonds widened 15 bps by late afternoon.

Treasuries rallied on Monday in a flight-to-quality bid. The 10-year benchmark note yield dropped to 1.75% from 1.92%. The 30-year bond yield fell nearly 20 bps to 2.72% from 2.91%.

American Tower's 10-years

Split-rated American Tower sold $500 million of 5.9% 10-year senior notes (Baa3/BB+/BBB-) to yield 412.5 bps, a market source said.

The notes were priced at the wide end of guidance in the 400 to 412.5 bps area, the source said.

There was a "sizeable" new issue premium, said a source away from the trade. The source pointed out that this debt priced at a spread nearly 200 bps more than American Tower's last offering of seven-year notes in December of 2010.

Bank of America Merrill Lynch, Barclays Capital Inc., Credit Agricole CIB, RBC Capital Markets LLC and RBS Securities Inc. were bookrunners.

Proceeds are being used to finance acquisitions, including recently announced property interests under an agreement with Colombia Movil, tower acquisitions in the U.S. and additional tranches of acquisitions in Latin America and Africa, for repayment of all or a portion of debt under a revolving credit facility and for general corporate purposes.

American Tower last priced debt in a $1 billion deal of 4.5% seven-year notes priced on Dec. 2, 2010 at 215 bps over Treasuries.

The owner and manager for leasing communication and broadcast tower sites is based in Boston.

Morgan Stanley gaps out

Morgan Stanley's paper moved out more than 50 bps in the secondary market on Monday, traders said.

The bank's 5.5% notes due 2021 widened to 525 bps bid, 500 bps offered. The notes were quoted on Friday at 460 bps.

Morgan Stanley priced the notes on July 21 at 250 bps over Treasuries.

The investment bank is based in New York City.

CDS costs rise sharply

Bank of America Securities' CDS costs were "the worst" among the banks, with CDS costs 35 bps higher at 450 bps bid, 460 bps offered. JPMorgan's CDS costs were seen as "the best" among banks on Monday, trading 20 bps higher at 175 bps bid, 185 bps offered.

CDS costs in broker investment banks were up higher, too, with Merrill Lynch "the best" on the day ending 30 bps higher at 490 bps bid, 510 bps offered. Goldman Sachs' CDS costs widened 60 bps to 390 bps bid, 400 bps offered, and Morgan Stanley's CDS costs ended 75 bps higher at 550 bps bid, 570 bps offered.

Sprint falls

Sprint Nextel's bonds fell on news the company would spend about $20 billion on more than 30 million iPhones to sell to its customers.

Sprint's 8.75% bonds due 2032 dropped 4½ points to 82.00 bid, 84.00 offered, the trader said. A month ago, the bonds were quoted at 102.25 bid, 103.25 offered.

Sprint is based in Overland Park, Kan.

AT&T ends weaker

AT&T's bonds also widened on Monday. The 3.875% notes due 2021 eased 5 bps to 165 bps bid, 158 bps offered, a trader said.

The telecommunications company is based in Dallas.

CenturyLink widens

CenturyLink's bonds moved out in secondary trading on Monday. The company's 7.6% bonds due 2039 (Baa3/BB/BBB-) widened 15 bps to 570 bps bid, 560 bps offered, a trader said.

CenturyLink sold C$400 million in a reopening of the notes at a spread of Treasuries plus 380 bps on June 9.

The integrated communications company is based in Monroe, La.

Paul Deckelman contributed to this review

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