UnitedHealth, CAT Financial, GE, KfW price on strong demand; quiet week predicted

By Andrea Heisinger and Paul Deckelman

Omaha, Feb. 4 - The tone remained strong enough Monday for a few investment-grade issuers to enter the market including UnitedHealth Group Inc., Caterpillar Financial Services Corp., General Electric Capital Corp. and KfW.

In the investment-grade secondary market Monday, advancing issues were virtually even with decliners, while overall market activity, reflected in dollar volumes, tumbled some 35% from Friday's levels.

Traders said things were extremely quiet, with many people present having what one called "a Super Bowl hangover" following all of the partying that took place Sunday in the wake of the New York Giants' exciting upset victory over the heavily favored New England Patriots.

Traders saw little or no trace of any new or recently priced deals in secondary, although one said last week's AT&T deal seemed to be trading a little better. Existing Caterpillar paper was wider in wake of the heavy-equipment manufacturer's new deal

UnitedHealth oversubscribed

UnitedHealth was "kind of the only game in town today," a source close to the deal said. It was the only industrial to come into the market, and also the largest issue of the day.

The company upsized its offering to $3 billion in four tranches, instead of three tranches.

The $250 million tranche of three-year floating-rate notes priced at par to yield three-month Libor plus 130 basis points. This was in line with price talk of Libor plus 130 bps.

The $550 million tranche of 4.875% five-year notes priced at 99.695 to yield 4.944% at a spread of Treasuries plus 218 bps. This was at the tight end of price talk of the 220 bps area.

The $1.1 billion tranche of 6% 10-year notes priced at 99.909 to yield 6.012% at a spread of Treasuries plus 237.5 bps. This was at the tight end of talk of Treasuries plus 240 bps area.

The $1.1 billion tranche of 6.875% 30-year notes priced at 98.475 to yield 6.997% at a spread of Treasuries plus 262.5 bps. This was at the tight end of price talk of the 265 bps area.

Bookrunners were Banc of America Securities LLC, Citigroup Global Markets Inc. and J.P. Morgan Securities Inc.

"Demand was strong, and it felt good," a source close to the deal said.

"All of the tranches were really oversubscribed. We could have done a $4 billion deal, but the company didn't need it."

The source said the tranches came with about a 20 bp concession, which he considered fair.

Demand for the offering totaled $8.5 billion, a source said.

Caterpillar upsizes

CAT Financial priced $750 million in two tranches, up from $500 million.

The $250 million tranche of two-year floaters priced at par to yield three-month Libor plus 45 bps. This was in line with price talk of Libor plus 45 bps area.

The $500 million tranche of 4.25% five-year notes priced at 99.871 to yield 4.279% at a spread of Treasuries plus 150 bps.

This was at the tight end of price talk of 150 to 155 bps.

Banc of America Securities LLC, Citigroup and Goldman Sachs & Co. were bookrunners.

The issue went well, a source close to it said.

"There was very good demand, and it was multiple times oversubscribed for both tranches," he said.

GE adds on, KfW brings $4 billion

General Electric reopened its 4.875% 10-year notes to add $250 million.

The notes priced at 100.281 to yield 4.827%.

Total issuance is now $1.25 billion, including $1 billion issued in 2005, an informed source said.

Credit Suisse Securities LLC was bookrunner.

KfW priced $4 billion in 3.25% five-year global notes at 99.621.

Deutsche Bank Securities Inc., HSBC Securities and Lehman Brothers Inc. were bookrunners.

The tone to start the day was weak, a source said.

"It was kind of boring out there today," he said. "There was not a lot going on."

This week will likely be quiet, with a couple of smaller deals on the horizon, a source said.

There is at least one small deal on the table for Tuesday, as well as one from Lehman Brothers, sources said.

"We haven't heard of much else coming out this week," a market source said.

February is predicted to be lower volume than January, when many financials and industrials came into the market.

"I think we'll see maybe a few more industrials [this week] and a couple of financials, but that's about it," a source said.

Secondary becalmed

A trader declared that "it's terrible today," in terms of rampant inactivity in the secondary market. "Nothing's going on at all."

He said he had "talked to one guy in the Street who said nobody had done anything because all of the New Yorkers were just talking about the Super Bowl, and it's very distracting today."

Tuesday is likely to see more of the same, with the focus in lower Manhattan on the celebratory parade for the winners up Broadway, taking up much of the mid-morning to early-afternoon (ET) period.

Caterpillar existing notes weaker

He said he had seen no sign of the Caterpillar deal. However, another market source did see Cat's existing 4.850% notes due 2012 having widened out by 15 basis points to a spread of 145 bps over Treasuries. Another source saw its 4.50% notes due 2009 having moved out to around the 175 bps level.

The first trader said "everything [else] is just about unchanged," with the exception of the Telephone bonds priced last week. He called the 5.50% notes due 2018, which priced last Tuesday at 185 bps over, trading Monday at 180 bps bid, 175 bps offered. They were at 182 bps bid, 180 bps offered on Friday, but "were just a little bit tighter today."

Besides that, he saw "very, very little going on."

In that same telecom sphere, a market source at another desk saw Sprint Capital's 8.75% notes due 2032 15 bps tighter, around the 435 bps mark.

Among the retailers Wal-Mart Stores' 4.45% notes due 2013 were seen having come in to around the 110 bps bid area, a 15 bps pickup on the day. Its 6.50% notes due 2037 were around the 140 bps region. But JC Penney's 7.40% notes due 2037 was quoted 20 bps wider around the 335 bps mark

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