Walgreen, Progress Energy Carolinas price bonds; new issues set to slow; Brown-Forman, Tyco gain; Macy's wider

By Andrea Heisinger and Paul Deckelman

New York, Jan. 8 - Issuance in the primary market remained steady Thursday, as Walgreen Co., Progress Energy Carolinas Inc. d/b/a Carolina Power & Light Co. and Toyota Motor Credit Corp. all sold bonds.

Friday will likely be "dead space," a source said, as unemployment numbers come out and are expected to be high.

In the secondary market Thursday, advancing issues maintained their recent three-to-two lead over decliners. Overall market activity, reflected in dollar volumes, fell by 8% from Wednesday's pace.

Spreads in general were seen a little wider, in line with tighter Treasury yields; for instance, the yield on the benchmark 10-year issue narrowed by 5 basis points to 2.44%.

New issues were seen trading fairly actively around the market, at mostly tighter levels. Among the gainers were the new Walgreen and Progress Energy Carolinas bonds, as well as the recently priced Brown-Forman Corp. and Tyco International Finance SA deals.

Among the more established names, Macy's Retail Holdings'' bonds widened out badly as the company lowered its earnings guidance and announced the planned closing of a number of its department stores.

Walgreen prices $1 billion

Drugstore chain Walgreen priced $1 billion of 5.25% 10-year notes at Treasuries plus 287.5 basis points.

The dollar price was 99.477 for a yield of 5.318%.

Bookrunners were Banc of America Securities LLC, Goldman Sachs & Co., J.P. Morgan Securities Inc. and Morgan Stanley & Co.

The deal came on the same day the company announced it was cutting 1,000 management jobs.

A source close to the deal said he wasn't sure how the news affected the offering's pricing.

"It didn't really seem to make it higher," he said. "They're still pretty highly rated and that always helps."

The company is rated A2/A+.

Progress Energy unit sells bonds

Progress Energy Carolinas, Inc. priced $600 million of 5.3% 10-year first mortgage bonds at 99.908 to yield 5.312% with a spread of Treasuries plus 285 bps.

Books were run by Deutsche Bank Securities and Goldman Sachs.

The utility company plans to use the proceeds to retire notes nearing maturity and repay commercial paper debt.

A source close to the sale said it went well and priced in line with talk.

Toyota financial reopens

Toyota Motor Credit Corp. reopened its three-year floating-rate notes to add another $10 million on Thursday.

The reopened notes priced at 100.0228 with a coupon of three-month Libor plus 350 bps.

Total issuance is $333 million, including the original $307 million priced Jan. 5.

Agents were Barclays Capital and Credit Suisse Securities.

Toyota prices $150 million

Toyota Motor Credit also priced $150 million of floaters due 2010 at par to yield three-month Libor plus 125 bps.

The agent for the medium-term notes was Banc of America.

GE Capital gives terms

General Electric Capital Corp. announced terms Thursday for a small issue priced Wednesday that is backed by the Federal Deposit Insurance Corp. Temporary Liquidity Guarantee Program.

The $750 million issue of floating-rate notes due 2010 priced at par to yield three-month Libor plus 5 bps.

Banc of America Securities, Citigroup Global Markets Inc., Goldman Sachs, J.P. Morgan and Morgan Stanley ran the books.

Week's issuance may be done

The week started busy and has slowed somewhat, but the issues continued at a steady pace.

That could end Friday, a source said, with the calendar drying up and potentially bad unemployment data coming out.

"We already had a bunch [of issues] this week," he said. "Maybe there are one or two still there, but they're not going to be big."

Some could be waiting for the coming week, and for the expected storm of bad news to pass.

All of the recent unemployment figures have been in line with expectations, he said, and the predictions of depressing unemployment data released Friday will likely not sway the bond market much.

If there aren't any new issues, he said, it will be extra hard to figure out if there is a negative effect.

Walgreen seen a winner, Progress pops

When the new Walgreen 5.25% notes due 2019 were freed for secondary dealings, a trader saw the drugstore giant's new bonds trading at a spread over comparable Treasury issues of 273 bps bid, 267 bps offered - well in from the 287.5 bps level at which those bonds had priced earlier in the session.

He also quoted the day's other big deal, Progress Energy Carolinas' 5.3% first mortgage bonds due 2019, at 265 bps bid, 260 bps offered, versus the 285 bps over level at which those bonds had priced.

Anheuser Busch bonds seen mixed

The largest of Wednesday's new industrial issues, Anheuser Busch InBev's $5 billion offering, was seen mixed; while the international brewing giant's $1.25 billion of new 7.20% notes due 2014 were at 539 bps over versus the 550 bps level at which those bonds had priced, and its $1.25 billion of new 8.20% bonds due 2039 were in a little from their 512.5 bps initial spread at 505 bps bid, 495 bps offered, the largest component of the deal - the $2.5 billion of 7.75% notes due 2019 - had actually widened a little to 531 bps bid, 522 bps offered versus their 525 bps pricing spread.

Nabors trades wider, Trans-Canada mixed

Also widening out was Nabors Industries Inc.'s new 9.25% notes due 2019, which a trader pegged at 685 bps bid, 680 bps offered; the Bermuda-based energy drilling contractor had priced $1.25 billion of the bonds Wednesday at 676.1 bps over.

Also in the energy sphere, Trans-Canada Pipelines' new 7.125% notes due 2019 traded at 448 bps bid, 440 bps offered, in from the 460 bps level at which the pipeline operator had priced its $750 million of the bonds on Tuesday. The other half of the deal, the $1.25 billion of 7.625% bonds due 2039, which also priced at 460 bps over, had stayed around issue at 465 bps bid, 459 bps offered.

Tuesday deals tighten

Outside of the energy sphere, a market source saw Bermuda-based diversified manufacturer Tyco's new 8.50% notes due 2019 having firmed smartly to 546 bps over. That's well in from the 681.9 bps level at which the company had priced its $750 million of new bonds on Tuesday.

And Brown-Forman's 5% notes due 2014 were seen by the source as having improved to 299 bps over. The Louisville, Ky.-based alcoholic beverage company had priced $250 million of the bonds Tuesday at 337.5 bps.

At another desk, a trader saw the Brown-Forman bonds at 310 bps bid, 305 bps offered.

PacifiCorp holds gains

Monday's two-part issue from PacifiCorp. continued to hold the gain it had notched after both halves priced at 310 bps over. A trader saw its $350 million of 5.50% notes due 2019 at 294 bps bid, 290 bps offered, while its $360 million of 6% bonds due 2039 were heard offered at 294 bps over.

Macy's gets mauled

Outside of the new-deal sphere, Macy's Retail Holdings' 5.35% notes due 2012 were seen having widened some 100 bps on the day to the 1,300 bp level; on a dollar-price basis the bonds fell more than 2 points to 76.

That followed the Cincinnati-based department store operator's announcement that it would close 11 underperforming stores in nine states - another sign of the ongoing difficulties of the retailing industry.

Macy's also cut its fourth-quarter earnings guidance to between 90 cents and $1 per share -- well below its previous outlook of $1.10 to $1.30 per share.

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