GE Capital prices notes, ends week of more than $8 billion; industrials to dominate coming week

By Andrea Heisinger and Paul Deckelman

New York, Aug. 1 - The month of August started with General Electric Capital Corp. bringing an offering, closing out a week with a steady stream of new issues.

Many of the issuers were solid, well-established names able to get deals done under adverse market conditions.

"You have these names like Coca-Cola [Enterprises] that can do things and get investors behind them," a source said. "If they need money, they'll get something in."

In the investment-grade secondary market Friday, advancing issues led decliners by a three-to-two ratio, while overall market activity, reflected in dollar volumes, fell nearly 18% from Thursday's pace.

Spreads in general were seen slightly wider, in line with somewhat lower Treasury yields; for instance, the yield on the benchmark 10-year issue tightened 2 basis points to 3.93%.

Week sees more than $8 billion issuance

Issuers found encouragement in the middle of the week, aided by an upturn in market conditions due to what was seen as positive news from Merrill Lynch & Co. and some successful issues.

Friday's main issue came from General Electric Capital, which priced $250 million, or 10,000 shares, of 6.5% 40-year GE Capital Internotes.

The "baby bonds," as a source close to the issue called them, priced at par of $25 and are non-callable for five years.

Other than that issue, the market was quiet.

"There's nothing eventful happening at all," a source said after the market's close.

The week's issuers were almost all industrial, with financial names either not wanting to come into the market, or not able to for blackout reasons, a source said.

Companies braving the market with larger issues included Berkshire Hathaway Inc., Rogers Communications Inc., Hong Kong & China Gas Co. Ltd. and Transneft.

Smaller issues came from General Mills Inc., Commercial Metals Co., Coca-Cola Enterprises Inc., AutoZone Inc. and Roper Industries Inc.

Although sources said there remained a small backlog Friday, it's likely to come out slowly in coming weeks, depending on market conditions.

August seen comparable to July

As July closed out with about $30 billion in new issues, sources predicted a similar fate for August as market conditions are likely to look similar.

"Unless spreads come down, we aren't going to see a lot of lower-rated issuers coming into the market unless they need money badly," a source said.

Some industrial names are waiting out the current negative market conditions, in hopes that spreads will return to "April, May levels," as one source said.

Relatively high new issue premiums are also keeping some out of the market, he said.

The coming week is seen as having a "manageable" calendar, a market source said.

It will also see a continuation of mostly industrial names coming into the market, and few financials.

Commercial Metals tighter

A trader said that the new Commercial Metals Co. 7.35% notes due 2018 were trading at a spread versus comparable Treasury issues of 332 bps bid, 330 bps offered, versus the 335 bps spread at which they had priced on Wednesday.

He saw the $1.4 billion of new Rogers Communications Inc. 6.80% notes due 2018, which priced Wednesday at 278 bps over, as having widened a little from that point to 280 bps bid, 277 bps offered.

The $350 million of 7.50% notes due 2038, which had priced at 288 bps over, firmed slightly to 286 bps bid, 281 bps offered.

The $700 million of General Mills Inc.'s 5.25% senior notes due 2013 remained at 203 bps bid, 202 bps offered - in slightly from the 205 bps at which the Minneapolis-based consumer foods giant had priced its bonds on Thursday.

The trader also saw Roper Industries' 6.625% notes due 2013 trading at 313 bps bid, 308 bps offered, in from the 325 bps over level at which the bonds had priced on Tuesday.

He saw Coca-Cola Enterprises 5% notes due 2013, which had priced at 165 bps on Tuesday and which had then firmed perhaps 1 to 2 bps, firming a little more Friday, although he only saw the bonds offered at 157 bps, with no bid side seen.

The two-part AutoZone deal was mixed; the 6.50% notes due 2014, while still trading inside their 312.5 bps Tuesday pricing spread, at 310 bps bid, 300 bps offered, had widened a little from the 305 bps bid, 302 bps offered level at which the bonds had traded Wednesday after being freed. However, the 7.125% notes due 2018 were at 285 bps bid, 275 bps offered - in from 290 bps bid earlier in the week and in even further from the 312.5 bps spread at which they had priced.

He also saw Walgreen Co.'s recently very actively traded 4.875% notes due 2013 - which had priced at 175 bps over on July 14, but then had tightened after that all the way down to the 151 bps bid, 150 bps offered level on Thursday, widened back out a little to 157 bps bid, 152 bps offered.

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