Con-way prices new issue to end week of mostly financial offerings; Merrill tighter in trading

By Andrea Heisinger and Paul Deckelman

Omaha, Dec. 21 - It was a week of financials coming to the market one last time for the year, capped off by a somewhat surprising new corporate issue Friday from Con-way Inc.

In the secondary market, the news that Merrill Lynch might be the next big financial company to get an influx of several billion dollars from an investor helped to push the big brokerage company's bonds upward. But there was no widespread euphoria in the financial sector on that possibility - while some other financial names like General Electric Capital Corp. were also tighter, others like Goldman Sachs Group Inc. and Wells Fargo were seen having widened out a bit.

Meanwhile, brokerage and banking credit-default swaps were seen pretty much unchanged, save for Washington Mutual, which widened.

Overall, market participants said the secondary was fairly quiet, with overall dollar value off nearly 50% from the day before. Declining issues led advancers better than six-to-five.

Con-way 'snuck' in

Trucking company Con-way priced $425 million of 7.25% 10-year notes at 99.993 to yield 7.25% at a spread of Treasuries plus 310.5 basis points.

Goldman Sachs & Co. ran the books.

"We knew we had it in the wings," a source close to the deal said.

"It could have come into the market at any time. It was kind of opportunistic."

They said the company decided to get into the market before the end of the year, and they "kind of snuck it in there."

Another market source said they had "no idea" there would be any issuance at all on a Friday before Christmas.

"I would guess they had it all sold," the source said.

The spread on the issue seemed wide, they said, but noted it was basically the last trading day of the year.

"They knew they were going to have to pay a little to get it done," the source said.

Also Friday Popular North America Inc. priced $275 million of 6.85% five-year senior notes in the Puerto Rican market, according to a press release from its parent company Popular, Inc.

And Toyota Motor Credit Corp. priced $150 million of medium-term notes due Oct. 25, 2011 at par on Friday to yield 4.07%,

Other issues for the week came mostly from financials, with Citigroup Capital XXI, Lehman Brothers Holdings Inc., UBS AG, General Electric Capital Corp., Goldman Sachs, Wachovia Corp. and Morgan Stanley pricing offerings.

General Electric Capital Corp. reopened an issue of notes, as did PPL Energy Supply LLC.

NGPL PipeCo LLC priced and settled a $3 billion offering of senior notes in three tranches, according to a Securities and Exchange Commission filing.

Bookrunners were Lehman Brothers Holdings Inc., Banc of America Securities LLC and Deutsche Bank Securities Inc.

Prudential Financial, Inc. subsidiary Universal Prudential Arizona Reinsurance Co. announced it will issue $500 million in senior surplus notes after entering into a purchase agreement with unaffiliated financial institutions.

Con-way should be the last new issue of the year, sources said.

Toyota seen as reverse inquiry

A secondary trader dismissed the new Toyota issue of 4.07% 2011 notes, saying it was "just a reverse inquiry on a small MTN issue - it probably went to one buyer, I would guess."

He suggested that maybe "there were one or two accounts that had a big chunk of money they needed to put to work for the year end and they probably went in and reversed [i.e. reverse-inquiried] Toyota and had the thing printed."

Otherwise, he opined that "there was very little activity. There was a lot of trust accounts jockying their books for the end of the year, but that was it - it's just all odd-lot business going on. I think [the market] has closed up shop for round-lot business."

Merrill gains

Among the existing financial names, Merrill Lynch's 6.40% notes due 2017 were seen by a market source around midday bid around 214 basis points over comparable Treasuries, in a little bit from Thursday's levels; by the day's end, at another desk, it was seen having firmed further to around 207 bps over, about a 10 or 12 bps tightening

The likely catalyst for the tightening was news reports indicating that Merrill Lynch might be getting as much as a $5 billion capital infusion from the Singapore state investment company, Temasek Holdings. If that deal goes though, the Big Bull will join such peers as Citigroup and UBS, who have also recently lined up big capital infusion deals with overseas investors.

Other financials mixed

Aside from Merrill Lynch, financials were seen mixed on the day in relatively restrained trading.

While GE Capital's 6 1/8% notes due 2011 also narrowed about 10 or 12 bps to a spread just over 100 bps, other companies in the sector were going in the opposite direction, with Wells Fargo's 5¼% notes due 2012 and 7.80% notes due 2010 each seen out about 8 to 10 bps at about the 145 bps and 155 bps levels.

In the credit-default swaps market, a trader said levels of CDS contracts linked to financial name paper were pretty much unchanged on the day - for instance, he saw Merrill Lynch's debt-protection costs about unchanged at 127 bps bid, 137 bps offered.

About the only name he saw different was Washington Mutual, with the cost of protecting investors in WaMu paper against a default having widened out 15 bps on the day to 395 bps bid, 415 bps offered.

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