GlaxoSmithKline prices year's biggest deal; Citigroup sells two; Berkshire Hathaway, TransAlta price

By Andrea Heisinger and Paul Deckelman

Omaha, May 6 - Conditions were ripe for new issues Tuesday, with GlaxoSmithKline Capital Inc. pricing a giant deal and Citigroup Inc. pricing two offerings. Berkshire Hathaway Finance Corp., TransAlta Corp. and Grupo Televisa SAB also priced issues.

The $9 billion of notes in four tranches from Glaxo was the fifth largest corporate issue ever, and the largest so far this year, sources said.

The largest corporate issue was from General Electric Capital Corp. with $11 billion, a source said.

Glaxo's issue size was originally $6 billion in three tranches. A floating-rate tranche was added.

The $1 billion two-year floating-rate notes priced at par to yield three-month Libor plus 62.5 basis points, which was tighter than price talk of Libor plus 65 bps.

The rest of the issue was fixed-rate notes.

The $2.5 billion of 4.85% five-year notes priced at 99.789 to yield 4.898% with a spread of Treasuries plus 173 bps.

The $2.75 billion of 5.65% 10-year notes priced at 99.939 to yield 5.658% with a spread of Treasuries plus 173 bps.

The $2.75 billion of 6.375% 30-year notes priced at 99.694 to yield 6.398% with a spread of Treasuries plus 173 bps.

All of the fixed-rate tranches priced tighter than price talk of 175 bps, sources said.

Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and Lehman Brothers Inc. ran the books.

Favorable market conditions were likely the reason for the issue's timing, a source said.

"They figured the levels they got were pretty good, considering what they would have paid five months ago," he said.

The company does not have many outstanding notes for comparison, but the 10-year tranche carried a 20 to 25 bps new issue premium, the source said.

Citi sells $2 billion preferreds

Citigroup priced $2 billion, or 80 million shares, of 8.5% non-cumulative preferred stock at par of $25.

The perpetual shares are non-callable for five years.

Citigroup was bookrunner.

Citi also priced a $550 million issue of 10-year floating-rate notes at three-month Libor plus 170 bps.

The issue priced late in the day and full terms were not available at press time.

Citigroup was bookrunner.

Berkshire brings $2 billion

Berkshire Hathaway priced $2 billion in two tranches via Rule 144A.

The $1 billion of 4.6% five-year notes priced at 99.876 to yield 4.628% with a spread of Treasuries plus 150 bps. This was on the tight end of price talk of 152 bps area.

The $1 billion of 5.4% 10-year notes priced at 99.854 to yield 5.419% with a spread of Treasuries plus 155 bps.

This was also at the tight end of price talk of 157 bps area.

Goldman Sachs & Co. was bookrunner.

TransAlta priced $500 million of 6.65% 10-year senior unsecured notes at 99.724 to yield 6.688% with a spread of Treasuries plus 285 bps.

HSBC Securities Inc. and Citigroup were bookrunners.

Grupo Televisa priced $500 million 6% 10-year senior unsecured notes at 99.28 to yield 6.097% with a spread of Treasuries plus 220 bps.

HSBC and J.P. Morgan were bookrunners.

More deals lined up

Other issues were announced and expected to price Wednesday.

JPMorgan Chase & Co. announced an issue of preferred stock, with size talked at $300 million.

It will likely go over the $1 billion mark, a market source said.

Price talk for the preferreds is 8% to 8.125%.

They will be priced at par of $25 and be non-callable for five years.

J.P. Morgan Securities Inc. is bookrunner.

An issue of global notes from the province of Quebec was also announced.

Deutsche Bank Securities Inc., HSBC, Merrill Lynch, Pierce, Fenner & Smith Inc. and RBC Capital Markets are bookrunners.

Puerto Rican financial services company Popular, Inc. announced a $350 million of non-cumulative preferred stock.

The stock will be perpetual and non-callable for five years.

'Great' conditions

When asked what market conditions were like Tuesday, one source gave a two-word answer.

"It's great," he said. "The stock market is benign and everything else looks good. Obviously, with the issues we have going today things are good."

The day started off a little rough but not enough to deter issuers.

"It's definitely still a constructive environment," a source said. "The opening was a little wider. Spreads were about 5 [bps] wider this morning."

Other than those that have already been announced, it's expected Wednesday will also have a wealth of new issues.

"We're still seeing the potential for another big day," a source said.

Spread mixed in trading

In the investment-grade secondary market Tuesday, advancing issues held a modest edge over decliners, while overall market activity, reflected in dollar volumes, jumped 35% from Monday's pace.

Spreads in general were mixed, as Treasury yields were all over the map; while the yield on the benchmark 10-year note, for instance, widened by 5 bps to 3.92%, the yield on the two-year credit narrowed by 4 bps to 2.38%.

Berkshire Hathaway's new bonds were heard to have tightened from the level at which they priced.

Berkshire tightens

A trader said the huge new GlaxoSmithKline four-part offering came too late in the session for any meaningful aftermarket activity.

A trader said that Berkshire Hathaway's new 4.60% notes due 2013, which had priced earlier in the session at a spread of 150 bps over comparable Treasuries, had tightened somewhat to 145 bps bid, 140 bps offered.

He also saw the company's new 5.40% notes due 2018 trading at 148 bps bid, 145 bps offered, in a few bps from the 155 bps level at which they had priced.

In other credits, he said that he "didn't see a lot" of Citigroup's new 6 1/8% notes due 2018, which priced on Monday at 230 bps over, quoting the new bonds "right around issue" at 230 bps bid, 228 bps.

BofA gives up some gains

Among other recently priced credits, a market source saw Bank of America's 5.65% notes due 2018 having widened out to 176 bps from 152 bps on Monday. However, the bonds remain well inside the 190 bps level at which they had priced on April 29.

CenterPoint Energy Inc.'s 6.5% notes due 2018, which had priced at 282 bps over on May 1, were seen having narrowed to 254 bps on Tuesday.

Morgan Stanley's 6.625% notes due 2018, which priced at 240 bps over on May 2, were quoted Tuesday at 233 bps, slightly wider than Monday's level at 229 bps.

In the credit-default swaps market, a trader said that the cost of protecting holders of major bank paper against the possibility of a default had widened out anywhere from 3 bps to 5 bps.

Wachovia CDS weakens

However, Wachovia Bank's CDS contract was seen having pushed out about 6 bps on the day to 103 bps bid, 108 bps offered; the Charlotte, N.C.-based banking giant said Tuesday that it was restating its first-quarter loss to $708 million, or 36 cents per share, almost double the originally announced $393 million, or 20 cents per share.

Washington Mutual was 10 bps wider.

A trader said that major brokerage CDS costs were around 3 bps wider.

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