Ontario, Starwood Hotels, JPMorgan, iStar price as week tops $35 billion; record May expected

By Andrea Heisinger and Paul Deckelman

Omaha, May 16 - Another high-volume week ended Friday with issues from the Province of Ontario, Starwood Hotels & Resorts Worldwide, Inc., JPMorgan Chase & Co. and iStar Financial Inc.

The week's issues totaled more than $35 billion, which couldn't top last week's record of more than $43 billion.

Activity for the five trading sessions was mostly comprised of many deals for smaller amounts rather than the fewer, large issues from financial and brokerage names in recent weeks.

Still Friday had one saw Ontario price $1 billion of 3.375% three-year bonds at 99.854 to yield 3.427% with a spread of Treasuries plus 94.25 basis points.

Bookrunners were Barclays Capital Inc., Deutsche Bank Securities Inc. and Toronto-Dominion Bank.

Starwood Hotels priced $600 million in two tranches.

The company reopened its 6.25% five-year notes to add $200 million. They priced at 100.747 with a spread of Treasuries plus 300 bps.

Total issuance is now $600 million, including $400 million previously issued.

The second tranche was $400 million 6.75% 10-year notes priced at par to yield 6.75% with a spread of Treasuries plus 296.6 bps.

Banc of America Securities LLC, J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Inc. and Morgan Stanley & Co. Inc. ran the books.

JPMorgan brings $2.5 billion

JPMorgan priced $2.5 billion of 6.4% 30-year senior notes at 98.846 to yield 6.488% with a spread of Treasuries plus 195 bps.

They priced in line with talk of 195 bps area.

The issue carried about a 20 to 25 bps new issue premium, which is in line for an issue of 30-year notes, a source said.

J.P. Morgan Securities Inc. was bookrunner.

iStar upsizes

iStar Financial priced an upsized $750 million 8.625% five-year senior notes at 99.495 to yield 8.75% with a spread of Treasuries plus 564.8 bps.

The size of the issue was increased from $500 million.

Price talk was 8.75 to 8.875% for the coupon.

Banc of America, Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. were bookrunners.

The company has an outstanding five-year bonds trading at 550 bps over Treasuries, a source said.

The new issue carried about a 15 bps new issue premium based on this.

"That's pretty good for someone rated as low as they are," he said.

Terms were given Friday for an issue from Deutsche Bank AG, London branch that priced late Thursday.

The company priced $2.5 billion 4.875% five-year senior notes at 99.864 with a spread of Treasuries plus 180 bps.

Deutsche Bank was bookrunner.

Terms were also given for an issue from PrivateBancorp Capital Trust IV that priced Thursday.

The company priced $125 million, or 5 million, 10% 60-year trust preferred securities at par of $25.

They are callable after five years and have an overallotment option of $18.75 million, or 750,000 securities, to be used within 30 days.

Price talk for the issue was 10% area.

Bookrunners were Stifel, Nicolaus & Co., Inc. and RBC Capital Markets Corp.

EIB, Liberty Mutual unveil deals

Two upcoming issues were announced Friday.

European Investment Bank plans a $3 billion issue of three-year notes via J.P. Morgan, Morgan Stanley and UBS Investment Bank.

The issue is expected to price early in the week.

Liberty Mutual is also expected to price an issue via Citigroup, Banc of America and J.P. Morgan.

This week's issuers were a mix of industrial and financial names with several utilities pricing notes.

Issues at or more than $1 billion came from Simon Property Group L.P., Petro-Canada, Wells Fargo Capital XIII, Philip Morris International Inc., United Technologies Corp., Fannie Mae, American International Group, Inc., Harley Davidson Funding Corp. and HBOS plc.

Smaller issues included those from Harsco Corp., Sovereign Bank, ACE INA Holdings Inc., Parker-Hannifin Corp., Canadian Pacific Railway Co., The PNC Financial Services Group, Inc., NiSource Finance Corp. and Eaton Corp.

The week turned out about how many thought it would.

"It was right in line with predictions," a source said. "We thought $30 to $35 billion, and that's about what happened."

Deal flow seen strong

The issues should keep on rolling next week right off the bat.

"It looks like it should be pretty busy," a source said. "There's quite a healthy calendar and Monday and Tuesday should be really busy."

The trend of a couple of months ago of issuers hesitant to come into the market on a Monday is a thing of the past, he said.

"Really, there's no reason for that to be true anymore. If the close is good on Friday, they'll jump right in at the beginning of the week."

The month is well on its way to record issuance, already breaking the $100 billion mark thanks to stable market conditions and financial names looking to build capital.

One source said there's not much that would stop the flow of issues at this point.

"It would take the Treasury spiking out and spreads going significantly wider," he said. "Spreads have tightened 50 to 60 bps and financials won't stop needing money. The banks and broker names have stuff maturing all the time."

Market stronger

In the investment-grade secondary market Friday, advancing issues led decliners by a better-than seven-to-five ratio, while overall market activity, reflected in dollar volumes, fell by about 31% from Thursday's pace.

Spreads in general tightened slightly as Treasury yields rose, with the yield on the benchmark 10-year issue, for instance, increasing by 1 basis point to 3.85%.

A trader said that the secondary market saw "a quiet day in general," with things "a little weaker."

Harley-Davidson strong

There was one notable exception to that rule, however - he saw investors going hog-wild over the new Harley-Davidson 6.80% notes due 2018.

While those bonds, which had priced Thursday at a spread of 300 basis points over comparable Treasuries - only saw a slight tightening in initial aftermarket dealings later that session, narrowing to around the 297 bid area - on Friday "they traded up significantly," going home at 275 bps, a pick-up of nearly 30 bps.

Other new deals better

Another big gainer was NiSource FinanceCorp.'s 6.15% notes due 2013, which had priced Thursday at 292 bps over but which had improved to about 275 bps over on Friday.

Canadian Pacific Railway Co.'s new 6.50% notes due 2018 were trading at 250 bps over, 10 bps tighter than their pricing level on Wednesday

Other new issues were considerably more restrained.

The trader saw J.P Morgan Chase & Co.'s new 6.40% notes due 2038, which had priced at 195 bps over, trading in secondary at an issue bid.

He saw Deutsche Bank's new 4.875% notes due 2013, which had priced Thursday at a 180 bps spread, quoted perhaps around the 175 bps area.

He saw no dealings in the new Halifax Bank of Scotland 6.75% subordinated notes due 2018, which had priced Thursday at 295 bps over and then firmed a little to 291 bps over in initial aftermarket trading.

Among other recently priced new issues, Simon Property Group's 6 1/8% notes due 2018, which priced at 235 bps last Monday, were seen having tightened about 10 bps since then.

GlaxoSmithKline plc's 4.85% notes due 2013, which priced at 173 bps over on May 6, were quoted on Friday at 147 bps over, about 1 bps wider on the session but still well inside its pricing spread. Its 5.65% notes due 2018 widened to 176 bps from 171 on Thursday and 173 when the issue priced.

Philip Morris International Inc.'s 5.65% notes due 2018, which had priced last Tuesday at 177 bps over, were seen continuing to trade well inside that level, at 146 bps over. But its 6.375% notes due 2038, which had also priced that day at 177 bps over, were being quoted Friday having widened to 184 bps.

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