Altria Group, Energy Transfer price deals, JPMorgan brings more FDIC notes; GE debt ignores S&P warning

By Andrea Heisinger and Paul Deckelman

New York, Dec. 18 - New deals from Altria Group, Inc. and Energy Transfer Partners LP priced Thursday, as well as more Federal Deposit Insurance Corp.-backed notes from JPMorgan Chase & Co.

The tone was much the same as it has been for the first half of the week, a source said, although the somewhat rosy tone comes at an awkward time heading into the holiday season.

In the secondary market Thursday, advancing issues continued to lead decliners, by about a two-to-one ratio. Overall market activity, reflected in dollar volumes, fell by nearly 17% from Wednesday's pace.

Spreads in general were seen wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year note fell by 10 basis points to 2.08%.

New industrial issues continued to trade up solidly, traders said, including names like Enbridge Energy Partners, Walt Disney Co. and Safeway Inc.

Standard & Poor's warning that General Electric Corp. and its General Electric Capital Corp. financial arm have a one-in-three chance of losing their coveted AAA ratings over the next two years seemed to have little or no impact on GE, the largest corporate bond issuer.

JPMorgan does $7.75 billion

JPMorgan Chase continued its issuance under the FDIC Temporary Liquidity Guarantee Program, pricing two tranches of new notes, and reopening an issue.

The company priced $3 billion of 2.125% notes due 2012 at 99.95 to yield 2.14% with a spread of Treasuries plus 121.7 basis points.

A second tranche was also $3 billion, but of floating-rate notes due 2012. They priced at par to yield three-month Libor plus 38 bps.

Its 2.625% notes due 2010 were reopened to add $1.75 billion. They priced at 101.776 to yield 1.69% with a spread of Treasuries plus 101.8 bps.

Total issuance is now $3 billion including $1.25 billion originally priced.

J.P. Morgan Securities was bookrunner.

Altria prices small deal

Altria Group priced $775 million 7.125% senior notes due 2010 at par to yield 7.125%.

The notes priced at a coupon, a source close to the deal said, and do not have a spread.

They are guaranteed by Philip Morris USA Inc.

Barclays Capital ran the books.

The notes attracted significant play from high-yield accounts, according to an informed source.

Perhaps because it is a short-duration bond, last Monday's decision by the U.S. Supreme Court that tobacco firms can be sued under state law for deceptive advertising of "light" cigarettes, a ruling against Altria's Philip Morris USA unit, did not appear to have gotten traction among investors, the source added. He noted that the deal was significantly driven by reverse inquiry.

Energy Transfer offers $600 million

Energy Transfer Partners priced $600 million of 9.7% 10-year senior notes at 99.928 to yield 9.7% with a spread of Treasuries plus 878 bps.

The spread is somewhat eyebrow-raising, a source said, but it's due to the company's low rating of Baa3/BBB-/BBB-.

"I think you have to look at it like a couple of months ago these guys wouldn't [have been] able to issue," he said.

Morgan Stanley & Co., Inc., Credit Suisse Securities, J.P. Morgan Securities and Wachovia Capital Markets were bookrunners.

Toyota Motor Credit releases terms

Toyota Motor Credit Corp. released terms for a $110 million deal of one-year floaters priced Wednesday.

The medium-term notes priced at par to yield three-month Libor plus 100 bps.

Agents were Banc of America Securities and Citigroup Global Markets.

Volume down, tone up

After steady volume in the last couple of weeks, it began to slow Thursday as the holidays near.

"It's kind of what we thought," a source said. "It's kind of nice, though, because it was so busy earlier [in the week] that we can kind of tie up some ends."

Corporate issuance will likely dry up further in the coming days, although financial names have an incentive to keep issuing, a source said.

"Of course people are still going to be doing the TLGP deals," he said. "I don't think that will slow down any time soon."

There haven't been any upcoming FDIC-backed offerings announced, although many of the big names continue to reopen issues as well as add new ones.

The tone was decent Thursday, but it doesn't mean companies will be rushing to the market.

"Really, things looked pretty good today," a source said. "The Treasury yields looked good and it was definitely appetizing for issuers. The timing is horrible, though."

He was referring to rapidly thinning syndicate desks and the coming holiday break.

New Energy Transfer Partners offered higher

When the new Energy Transfer Partners 9.70% notes due 2019 were freed for aftermarket dealings, a trader quoted them offered at 101.5 bid, versus the 99.928 bid level at which the bonds had priced earlier in the session.

He said that the new Altria Group 7.125% notes due 2010 had just priced and had not been freed at that point for aftermarket activity.

Enbridge Energy bonds trade up

He saw Enbridge Energy Partners' new 9.875% 190-year bonds at 101 bid, 101.375 offered; the company priced $500 million of the bonds Wednesday at 99.94.

Safeway bonds keep firming

Among other issues which had come to market on Wednesday, Safeway's 6.25% notes due 2014 were seen at 475 bps bid, 460 bps offered - slightly tighter than the 480 bps bid, 470 bps offered levels at which the $500 million of new bonds had traded after having been freed for the secondary. The Pleasanton, Calif.-based Number-Three U.S. supermarket operator priced the issue earlier Wednesday at a spread over comparable Treasuries of 512.5 bps.

Disney no Mickey Mouse bond

Another strong gainer was Disney's new 4.50% five-year bonds. The Burbank, Calif.-based entertainment company and theme park operator priced its $1 billion of bonds Wednesday at 337.5 bps over; by Thursday afternoon, they had firmed smartly to 305 bps bid, 300 bps offered.

Kraft hangs on

The trader saw Kraft Foods Inc's new $500 million of 6.75% notes due 2014 at 470 bps bid, 461 bps offered, about unchanged from Wednesday's levels but still in solidly versus the 525 bps level at which the Northfield, Ill.-based food processing giant had priced those bonds on Tuesday.

It was the same story for Kinder Morgan Energy Partners, whose 9% notes due 2019 were quoted trading at 101 bid, 101.875 offered on Thursday - a touch easier than the 101.5 bid, 102 offered level seen Wednesday, but still well up from the 99.973 level at which the Houston energy pipeline operator's $500 million of bonds had priced, also on Tuesday.

GE shrugs off S&P

A trader meantime said that there was not much going on with GE's bonds, despite the warning from S&P that its AAA rating stood a one-in-three chance of being downgraded in the next two years because of deteriorating earnings.

He said that they had been lifted over the last few days, since the Fed announced its big interest rate cut on Tuesday. However, he said, when asked whether the S&P move had scared off investors, he answered "the long and the short of it - is no."

He quoted the company's 2032 bonds trading at 375 bps bid, "maybe a touch weaker" than recent levels at 370 bps over, but would not attribute that to the ratings agency outlook change.

He also said that there had been no movement in Citigroup paper following a downgrade by Moody's Investors Service.

"There's been a lot of buying across the board and I think that's negating any kind of [negative] mood that might be there."

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