GE Capital brings 30-year notes, TransCanada, Tyco, other issuers flood primary

By Andrea Heisinger and Paul Deckelman

New York, Jan. 6 - The investment-grade new issue market exploded Tuesday, seeing deals from General Electric Capital Corp., Devon Energy Corp., Tyco International Finance SA, Centerpoint Energy, Inc., TransCanada Pipelines Ltd. and Morgan Stanley.

The pace is likely to continue for the rest of the week, a source said, although there may be a slowing in the number of industrial names.

In the secondary market Tuesday, advancing issues continued to lead decliners, by a nearly three-to-two ratio. Overall market activity, reflected in dollar volumes, rose by nearly 20% from Monday's pace.

Spreads in general were seen a little wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year issue declined by 5 points to 2.43%.

The secondary market took a back seat to the onrushing onslaught of new deals coming in both the financial and the non-financial/industrial sector. There was little meaningful aftermarket activity in the new bonds, given the torrent of supply that absorbed everyone's attention, although the new GE Capital issue managed to move into trading, although the bonds really did not go anywhere.

GE Capital prices without guarantee

General Electric Capital priced $4 billion of 6.875% 30-year notes at 98.478 to yield 6.997% with a spread of Treasuries plus 400 basis points.

Agents were Barclays Capital Inc., Citigroup Global Markets Inc. and Morgan Stanley & Co., Inc.

The deal was the first from a financial name in several weeks that wasn't backed by the Federal Deposit Insurance Corp. Temporary Liquidity Guarantee Program.

A source said it was encouraging that the deal got done and added that "it seemed to go well."

He was unsure whether it would lead to other financial names tapping the market.

"They got a good spread, so that was good," he said.

TransCanada sells $2 billion

TransCanada Pipelines priced $2 billion in two tranches.

The $750 million of 7.125% 10-year notes priced at 99.977 to yield 7.128% with a spread of Treasuries plus 460 bps.

The $1.25 billion of 7.625% 30-year notes priced at 99.148 to yield 7.698% with a spread of Treasuries plus 460 bps.

Citigroup Global Markets Inc. and HSBC Securities ran the books.

Tyco offers $750 million

Tyco International Finance priced $750 million in 8.5% 10-year bonds. The size was originally floated at $500 million, although a source close to the deal said it wasn't an official size so the deal wasn't technically upsized.

The notes priced at 99.997 to yield 8.5% with a spread of Treasuries plus 681.9 bps.

Citigroup and Morgan Stanley & Co. were active bookrunners.

There was about $3.5 billion in interest in the books for the deal, a source said, with a large reverse inquiry.

The change-of-control put option on it also attracted a lot of equity holders, he said.

CenterPoint upsizes deal

CenterPoint Energy Houston Electric priced an upsized $500 million of 7% five-year first mortgage bonds at 99.978 to yield 7% with a spread of Treasuries plus 528.6 bps.

The size was originally $300 million, a source said.

UBS Investment Bank, Credit Suisse Securities and Scotia Capital ran the books.

Devon Energy prices $1.2 billion

Devon Energy priced $1.2 billion in two tranches of senior notes.

The $500 million of 5.625% five-year notes priced at 99.774 to yield 5.677% with a spread of Treasuries plus 400 bps.

The $700 million of 6.3% 10-year notes priced at 99.698 to yield 6.341% with a spread of Treasuries plus 385 bps.

Banc of America Securities LLC, J.P. Morgan Securities Inc. and UBS were bookrunners.

Brown-Forman sells small deal

Alcoholic beverage company Brown-Forman priced $250 million of 5% five-year senior notes at 99.634 to yield 5.082% with a spread of Treasuries plus 337.5 bps.

Bookrunners were Banc of America Securities, Barclays, Citigroup, Wachovia Capital Markets and J.P. Morgan Securities.

There was a lot of interest in this note sale, although a source close to it said he wasn't sure how oversubscribed the books were. He did say "it went well."

Morgan Stanley reopens floaters

Morgan Stanley reopened its floating-rate notes due 2011 that are backed by the Federal Deposit Insurance Corp. Temporary Liquidity Guarantee Program to add $150 million.

The notes priced at 100.729 and have a coupon of three-month Libor plus 35 bps.

Total issuance is $650 million including $500 million issued Dec. 22.

Morgan Stanley ran the books.

InBev plans deal

Anheuser-Busch InBev is planning a note sale in three tranches, market sources said Tuesday.

As of press time, the books had not been closed, a source said.

The sale is benchmark-sized, and in five-, 10- and 30-year tranches

The five-year notes are talked at Treasuries plus 550 bps, the 10-year notes at 525 bps over Treasuries and the 30-year notes at 512.5 to 525 bps.

Banc of America Securities is lead bookrunner, along with Barclays Capital, Deutsche Bank Securities and J.P. Morgan Securities.

Nevada Power plans note sale

Nevada Power Co. d/b/a NV Energy announced in a 424B5 Securities and Exchange Commission filing Tuesday its plans to price $125 million of notes due 2014.

A source close to the deal said it will likely price Wednesday.

Bookrunner is UBS.

Toyota financial gives floater terms

Toyota Motor Credit Corp. announced terms Tuesday for a sale of $307 million in floating-rate notes due 2012.

The three-year notes priced at par to yield three-month Libor plus 350 bps.

Agents were Barclays Capital Inc., Credit Suisse Securities, Deutsche Bank Securities, HSBC Securities and Loop Capital Markets.

Deal pace seen continuing

After a somewhat slow start to 2009, the new issue market picked up the pace considerably, with a number of offerings either priced or announced.

A market source said he didn't see the pace slowing in the next couple of days, although the type of issuers may change.

"I think industrials will be quieter," he said. "But the pace should continue."

There was "a little calendar built up," he said, which could explain the amount of names that jumped into the market all at once.

"They were maybe encouraged by what happened yesterday," a source said. "We saw a $10 billion deal get done, which is good, even though it was an FDIC deal."

One of the first financial issues not backed by the FDIC came to the market Tuesday, from the same name that brought that $10 billion deal: General Electric Capital Corp.

"I guess they need money," the source said.

A positive market tone helped to buoy spirits, and showed that the investment-grade market is resilient.

Issuers realize the economy may not rebound soon, and there have been slow steps to encourage companies to price deals.

"The tone is going well so far [in 2009]," a source said. "We've seen a lot of single-A issuers in the past few days, and they showed the new issue concession is going down."

Another change in recent days is the type of debt being priced. Up until about a month ago, issuers were fearful of long bonds, and stuck with either five- or 10-year notes.

The 30-year notes are coming back, however, with GE Capital pricing all of its $4 billion issue Tuesday in that maturity.

High yields and the long duration of the 30-year notes are attractive, a source said.

New GE Capitals hold around issue

When the new GE Capital 6.875% bonds due 2039 were freed for secondary dealings late in the day, the giant issue was seen by a trader to have moved to a spread over comparable Treasury issues of 405 bps over bid, 395 bps offered - straddling the 400 bps over spread at which the $4 billion offering had priced.

Apart from that issue - the first financial issue to come to market without a government guarantee in at least two months - the trader said that the sector was quiet, since most of the day's new deals were coming out of the industrial sector, and even the one other financial deal that priced - the Morgan Stanley reopener - was one of the FDIC offerings.

Generally, he said, "there's a very strong bid to the market, with bonds trading up." He opined that he thought they may be "getting a little ahead of themselves," although he allowed that participants would see in the coming days whether that assessment was accurate.

Existing GE Capital bonds widen out

With GE Capital having brought two huge mega-deals within as many sessions, there was some pushback from the holders of its existing bonds.

A market source saw GE Capital's 5 7/8% notes due 2038 among the major losers on the day; those bonds widened out nearly 60 bps on the day to about the 350 bps over level.

It was one of the most actively traded issues on the day, with the source having seen over $75 million changing hands by mid-afternoon.

GE Capital's recently priced 3% FDIC-backed notes due 2011 were seen trading at 101 bps over, out around 25 bps from the 75 bps level at which they had been trading on Friday. However, those bonds were still well in from the 212 bps over level at which the company had priced $3.5 billion of those bonds on Dec. 4.

Goldman issue heavily traded

Also among the financials, a trader saw Goldman Sachs Group Inc.'s 6¼% notes due 2017 going out trading around 414 bps over - a 6 bp tightening from late Monday's levels, although the bonds had widened out from their tight level of the day at 385 bps, seen around mid-afternoon.

The trader said that some $159 million of those bonds changed hands - the most actively traded high-grade bonds in the market - despite a lack of fresh news about the big New York-based former investment bank-turned commercial banking company.

Bank of America NA's recently issued 1.7% notes due 2010 tightened by 5 bps on the day, a source said, pegging the bonds at 75 bps over. That was also in by over 20 bps from the 97 bps level at which the Charlotte, N.C.-based banking giant priced its $3.75 billion of bonds on Dec. 19, as part of a $7 billion four-tranche megadeal. B of A's established 5.375% notes due 2012 spread out by nearly 50 bps to the 320 bps level.

Morgan Stanley's 5.625% notes due 2012 were seen having widened out some 60 bps on the day, to 650 bps.

Bank, broker CDS costs tighten

In the credit-default swaps market, a trader said that the cost of insuring holders of big-bank paper against a possible event of default were anywhere from 5 bps to 15 bps tighter on the day.

Meanwhile, CDS costs for bonds of the former investment banks were 10 bps to 25 bps tighter.

Refuge in high grades

Meanwhile, with nothing for sale in the high-yield, some junk players have drifted over to the busy investment grade primary market, sources say.

While junk spreads have gapped in, high-grade spreads continue to linger near historic wides.

Junk accounts took part in Weatherford International Ltd.'s upsized $1.25 billion issue of 9 5/8% senior notes (Baa1/BBB+), which priced in two tranches on Monday, with the 10-year notes coming at a 723 bps spread to Treasuries, sources said.

"That was a case of them just wanting to get more liquidity in the revolver, so they started out at $500 million and upsized it," said the mutual fund manager, who did not play the deal.

However later Tuesday a syndicate source confirmed that high-yield accounts had indeed been involved.

"If your view is that spreads have to tighten then you buy whatever you can get liquidity in," said the mutual fund manager.

"High-yield guys have money they want to put to work, and they can't get anything in the high-yield secondary. So they'll buy anything if they think it's going to tighten."

A little later a high-yield syndicate source exclaimed that the high-grade market was "going nuts," with nine deals pricing during the Tuesday session.

Paul Harris contributed to this report

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