Transocean's $2.5 billion, United Technologies' $1 billion lead emerging backlog; tone softens

By Andrea Heisinger and Paul Deckelman

Omaha, Dec. 4 - More of the recent backlog came out Tuesday with new issues from Transocean Inc., Baxter International Inc., United Technologies Corp., Cintas Corp. No. 2, McCormick & Co., Inc., Protective Life Corp., Alabama Power Co. and Bank of New York Mellon Corp.

The tone was slightly softer than Monday, a market source said.

In the secondary market, trading in the new or recently priced issues was once again the main focus, market participants said. Declining issues led advancers by a slight margin.

Among the day's new deals, Transocean priced $2.5 billion of notes in three tranches.

The $500 million tranche of 5.25% five-year notes priced at 99.868 to yield 5.281% at a spread of Treasuries plus 200 basis points.

The $1 billion tranche of 6% 10-year notes priced at 99.663 to yield 6.046% at a spread of Treasuries plus 215 bps.

The $1 billion tranche of 6.8% 30-year notes priced at 99.874 to yield 6.811% at a spread of Treasuries plus 245 bps.

Bookrunners for all of the tranches were Goldman Sachs & Co. and Lehman Brothers Inc., with Citigroup Global Markets Inc. also on the five-year tranche and J.P. Morgan Securities Inc. on the 10 and 30-year tranches.

"It went well," a source close to the deal said. "We were oversubscribed on most of them [tranches]."

United Technologies at 150 bps

United Technologies priced $1 billion in 5.375% 10-year global notes at 99.807 with a spread of Treasuries plus 150 bps.

Bookrunners were Deutsche Bank Securities Inc., J.P. Morgan, Banc of America, Citigroup and HSBC Securities Inc.

Cintas priced $250 million in 6.125% 10-year senior notes at 99.898 to yield 6.139% at a spread of Treasuries plus 225 bps, via bookrunners KeyBanc Capital Markets and J.P. Morgan.

Protective Life priced $150 million in 6.4% 10-year senior notes at 99.945 to yield 6.406% at a spread of Treasuries plus 250 bps.

Merrill Lynch and Lehman Brothers ran the books.

Alabama Power priced $200 million in 4.85% five-year senior notes at 99.828 to yield 4.889% at a spread of Treasuries plus 160 bps, with Merrill Lynch and Morgan Stanley & Co., Inc. as bookrunners.

Medical products company Baxter International priced $500 million in 30-year 6.25% senior notes at 99.840 to yield 6.262% at a spread of Treasuries plus 188 bps.

Banc of America Securities LLC and UBS Securities LLC were bookrunners.

Spice company McCormick priced $250 million in 5.75% 10-year senior notes at 99.96 to yield 5.755% at a spread of Treasuries plus 187 bps, with Wachovia Capital Markets LLC, Banc of America and SunTrust Robinson Humphrey as bookrunners.

Bank of New York had two issues Tuesday, both run by Lehman Brothers and Merrill Lynch.

The company priced $100 million in three-month Libor plus 44 bps three-year floaters at par.

It also reopened its $375 million in three-month Libor plus 35 bps two-year notes from Nov. 30 to add $50 million. This brings the total issuance to $425 million.

Fannie Mae plans preferreds

Home mortgage lender Fannie Mae announced it will issue $7 billion in preferred stock in December. The stock will be sold in one or more offerings, according to a press release.

Lehman Brothers and Merrill Lynch will run the books.

Harley-Davidson Motor Co. launched a $500 million issue of notes Tuesday, but did not price it.

One market source said the company was having trouble selling the issue to investors.

Consequently, they saw price talk increase from Treasuries plus 165 bps to 175 bps and then 190 bps.

"I don't think there are too many people who are keen on Harley-Davidson, especially this time of the year - it's kind of a specialty retailer more than anything else," the source said.

"It will be interesting to see what happens with that one. It's been launched but it hasn't been priced so it just depends on when they can get the book together on it."

Another market source said the deal is expected to price Wednesday, and they didn't know what the hold up was.

"I'm not really sure why we didn't see it price today," the source said.

Bookrunners for the issue are J.P. Morgan, Citigroup and BNP Paribas Securities Corp.

Flow of deals seen continuing

The high volume of issues continued from Monday as issuers try to purge what they couldn't get into the market when conditions were more volatile.

"We saw a number of things print today," a source said. "The numbers were wide on everything, and I'm not even talking about CDS. Anything that printed was wide."

Unless the tone changes, the current pace is likely to continue for the rest of the week, a source said.

"We still have a pretty decent calendar, and if it improves at all we could have another day like today," he said.

Another source said they didn't know of any definite upcoming issues as companies are still on a day to day basis.

"There are one or two small trades that could go this week, but nothing definite," he said.

Baxter up in trading

A trader saw the new Baxter International 6¼% 30-year bonds do "a little bit better in the secondary", at 186 bps bid, 183 bps offered over Treasuries, in slightly from their 188 bps spread at pricing. At one point, the bid-side spread got as tight as 185 bps, before returning to the 186 bps level.

He also saw the new McCormick 5¾% 10-year notes offered at 182 bps without a bid; the bonds priced at a spread of 187 bps late in the afternoon.

The trader said that there was no aftermarket action seen in the new Alabama Power 4.85% notes due 2012 or the Protective Life 6.4% notes due 2018 - both of them small-sized deals ($200 million and $150 million respectively) which "probably got put away" after pricing.

AT&T deal trades weakly

He said that the huge AT&T Inc. deal priced on Monday "did not perform very well after it broke," with the 30-year tranche widening out about 3 or 4 bps from its 200 bps pricing spread.

The Caterpillar Finance 4.85% notes due 2012, on the other hand, which priced Monday at 155 bps over, "did a little bit better today," tightening to 152 bps bid, 151 bps offered.

Other recently priced deals, he said, like Walt Disney Co. and Kellogg Co., were "doing okay" - but he added that "there isn't anything that's knocking the doors off. They're doing okay because they're pricing these things cheap to the market."

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