Sherwin-Williams, Toyota Credit price deals in quiet primary; spreads steady; Sherwin gains

By Andrea Heisinger and Cristal Cody

New York, Dec. 16 - Sherwin-Williams Co. and Toyota Motor Credit Corp. were the lone entrants in the high-grade bond market on Wednesday as the Federal Reserve wrapped up a two-day meeting.

Little change came out of the meeting, but it could mean a busier day Thursday if some companies that had been holding off on issuing until after a rate announcement decide to come to the market.

Paint and coatings maker Sherwin-Williams sold $500 million in five-year bonds early in the afternoon, likely trying to get in ahead of the Fed meeting's conclusion. The sale came in well below price guidance.

In the secondary market, trading was seen to have lessened by mid-week, though the rare sale from Sherwin-Williams surprised a few in the market. The new bonds tightened when they were freed to trade.

Overall trading volume fell to under $8 billion, down from about $8.5 billion the day before.

"It was slow volume -- fairly light, but not terrible for this time of year," a trader said.

A source said the mid bid-asked spread level on the CDX Series13 North American high-grade index had declined 2 bps to 90 bps.

Spreads, though, were little changed, in line with generally steady Treasury yields. For instance, yields on the benchmark 10-year Treasury note held unchanged at 3.59%.

Meanwhile, the market considered the Federal Reserve's pledge to hold its key lending rates at record lows -- zero to 0.25% -- for an extended period to reduce unemployment and bolster the economy to be largely a non-event.

Besides the trading in the new Sherwin-Williams bonds, there was some brisk activity seen in the new issue from Aflac Inc., which had priced on Monday.

Citigroup Inc. paper showed only slight reaction to news that Abu Dhabi's state investment agency is trying to legally wriggle out of its 2007 agreement to invest $7.5 billion in the New York-based banking giant.

Sherwin-Williams sells five-years

Sherwin-Williams sold $500 million of 3.125% five-year senior unsecured notes by early afternoon at Treasuries plus 82 bps.

The deal priced well below talk that was initially whispered at 100 bps when it was announced, the source said, and then revised to the 90 bps area.

Citigroup Global Markets and J.P. Morgan Securities ran the books.

Proceeds are being used to repay a portion of short-term borrowings and for general corporate purposes.

The paint and coatings maker is based in Cleveland, Ohio.

Toyota funding arm prices floaters

Toyota Motor Credit priced $300 million of one-year medium-term floating-rate notes at par to yield one-month Libor plus 0 bps, according to FWP filings with the Securities and Exchange Commission.

Citigroup Global Markets was agent.

The U.S. funding arm of Toyota Financial Services is based in Torrance, Calif.

Fed leaves primary quiet

There was little impact from the Fed's decision to keep overnight interest rate at virtually zero, a syndicate source said late in the day. That didn't mean that companies didn't shy away from issuing prior to that announcement.

"I think maybe there were some [companies] holding back," the source said. "It could be busier tomorrow."

There is a small amount of supply left for the week, although it's unclear when it will come out.

The top of the week saw a flurry of deals as issuers tried to get deals done ahead of any Fed rate change.

"I just don't think there is much left [to price]," a market source said. "We have maybe a couple of busy days left this year."

Sherwin-Williams, back after 12 years, tightens up

When the new Sherwin-Williams bonds were freed for secondary dealings, a trader saw the bonds having tightened to a spread over comparable Treasury issues of 75 bps bid, 74 bps offered. The Cleveland, Ohio-based paint manufacturer on Wednesday priced $500 million of the senior notes at 82 bps over Treasuries.

Another trader said that "the last offer I saw was at 72. It looks like they have tightened and continue to tighten," noting that "there was decent interest in it. Sherman-Williams hadn't come out with a deal since 1997."

The company only has two other series of notes, each $150 million, outstanding.

"A lot of times that hurts an issuer because some people won't bother buying it, because they don't know the credit very well," the trader said. "It'll be interesting to see if it's just put away and everybody forgets about it or if it will continue to trade tomorrow."

Aflac remains tighter

Also on the new-deal front, Aflac's 6.90% bonds due 2039 were seen remaining at tighter levels on Wednesday, with a trader quoting them offered at 240 bps over.

Another trader pegged the bonds at 244 bps bid, 241 bps offered - which he said was actually a couple of basis points wider than the levels the Columbus, Ga.-based insurer's issue had held since the $400 million of new paper came to market on Monday at 250 bps over.

Those bonds had been seen in Monday's aftermarket having tightened to 240 bps bid, 238 bps offered.

Wednesday's dealings in the new Aflac bonds were very active, with a market source noting that nearly $70 million of the paper had changed hands heading into the final hour of trading.

A trader attributed the heavy volume to short covering on the part of "syndicate guys."

XTO bonds widen

Apart from the new-issue arena, trading continued in XTO Energy Inc.'s 10-year bonds, which "widened a bit" on Wednesday, a trader said.

The Fort Worth, Tex.-based energy exploration and production company said earlier this week it would be acquired by petroleum giant ExxonMobil Corp. in a deal valued at $40 billion, which includes the assumption or repayment of about $10 billion in XTO debt.

The notes were offered Wednesday at 60 bps plus Treasuries and were quoted at 63 bps bid on Tuesday.

"There were a decent amount of trades that went through," the trader said.

Citi shows little action

Meanwhile, Citigroup Inc. bonds didn't react much to news of an arbitration claim filed by the Abu Dhabi Investment Authority, which is attempting to renege on a deal to buy $7.5 billion of stock at 2007 prices or on the bank's plans to sell stock at a discount to pay off government borrowed funds.

"There's not as much trading going on," the trader said. "Some of the shorter paper traded and is usually fairly active, but not so much today."

Another trader replied "not really," when queried about whether Abu Dhabi's claim that Citi had engaged in "fraudulent misrepresentations" about its financial health when pitching the investment to the oil-rich emirate over two years ago had any impact on its bonds.

He saw Citi's 6.015% notes due 2015 getting as wide as 295 bps bid, 285 bps offered, versus Tuesday's tightest levels at 273 bps, "but they tightened back in" to around 290 bps bid, 280 bps offered.

There was also not much market buzz about Citi's announcement Wednesday that it would sell shares at $3.15 each, down about 20% from the New York-based bank's closing stock price on Friday, to pay off loans provided by Washington under the Troubled Asset Relief Program.

Fed non-action a non-story

There was little market response to the Federal Reserve's announcement Wednesday that it will hold its key lending rates at record lows - zero to 0.25% - for an extended period to reduce unemployment and bolster the economy.

"There weren't any real surprises," one trader said. "It didn't move the market really dramatically one way or another on the Treasuries side."

A second trader characterized the post-Fed market as "pretty uneventful. Spreads generically were probably a little bit better, give or take. We were a little weaker [Tuesday] and a little better today, but nothing really stood out."

He added that with the end of the year fast approaching, "it's getting a little quiet out there - we still get some things done, but it's getting a little thin out there. People are just cleaning some stuff up."

-Paul Deckelman contributed to this report

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