Citi, Avon, Clorox, Computer Sciences, Allstate price; Colonial Bank plans issue; Biogen issue hits snag

By Andrea Heisinger and Paul Deckelman

Omaha, Feb. 27 - As predicted, the flow of new issues continued Wednesday with Citigroup Inc., Avon Products, Inc., Clorox Co., Computer Sciences Corp. and Allstate Life Global Funding Trust pricing.

In the investment-grade secondary market Wednesday, advancing issues led decliners by a not-quite seven-to-six margin, while overall market activity, reflected in dollar volumes, was little changed from Tuesday's levels.

The main focus was in trading the bonds of newly priced issues such as Computer Sciences and Avon Products.

There was also a brisk level of trading in bonds from Monday or Tuesday, such as UST Inc. and Pacific Gas & Electric Co.

Established bonds were seen mostly bid for.

Citi sells $2.5 billion

Citigroup priced $2.5 billion of 6.875% 30-year notes at 99.332 to yield 6.929% with a spread of Treasuries plus 230 basis points.

They priced in line with talk of 230 bps area.

Citigroup Global Markets Inc. was bookrunner.

Clorox comes at tight end

Clorox priced $500 million of 5% five-year senior notes at 99.804 to yield 5.045% with a spread of Treasuries plus 217 bps.

This was on the tight end of price talk of 220 bps area.

Citigroup, J.P. Morgan Securities Inc. and Wachovia Capital Securities LLC ran the books.

It came at around a 12 to 13 bps new issue premium, a market source said.

"Wow, that's pretty good," he said. "Industrials are doing so much better than financials right now."

This issue compared with Citigroup, which the source figured paid around 35 bps premium.

Computer Sciences matches talk

Computer Sciences priced a $1.7 billion private offering of notes in two tranches.

The $700 million of 5.5% five-year notes priced at Treasuries plus 272 bps.

The $1 billion of 6.5% 10-year notes priced at Treasuries plus 270 bps.

Both tranches priced in line with talk.

Barclays Capital Inc., Banc of America Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Inc. were bookrunners.

Avon sells tight to talk

Avon priced $500 million of notes in two tranches.

The $250 million of 4.8% five-year notes priced at 99.855 to yield 4.833% with a spread of Treasuries plus 195 bps.

This was on the tight end of price talk of 200 bps area.

The $250 million of 5.75% 10-year notes priced at 99.655 to yield 5.796% with a spread of Treasuries plus 195 bps.

This was also on the tight end of price talk of 200 bps area.

Citigroup and Goldman Sachs & Co. were bookrunners.

Allstate prices floaters

Allstate priced $1.36 billion five-year extendible floating-rate notes at par to yield three-month Libor plus 32 bps.

They have an initial coupon of Libor plus 25 bps that increases by 2 bps each year until the final year when it increases by 1 bp.

Underwriters were Merrill Lynch, Morgan Stanley & Co. Inc. and Lehman Brothers Inc.

Colonial planned, Biogen still marketing

An issue of 30-year subordinated notes from Colonial BancGroup, Inc. was announced.

It is expected to price early afternoon Thursday, a source close to the issue said.

Bookrunners are Citigroup, Lehman Brothers, Morgan Stanley, UBS Investment Bank and Wachovia.

A two-tranche issue from Biogen Idec, Inc. announced Tuesday has not priced and is still being marketed to investors, a source close to the issue said.

"It's still in the market," he said. "It has lower ratings, Baa3 and BBB, and no one thought it would have one day of execution with this type of volatility in the market."

"There was kind of hiccup in selling it and some negative headlines hit today with one of their drugs."

The issue is being talked in tranches of five and 10-year senior notes.

Deal flow seen continuing

Despite this issue having some problems getting done, the overall environment is still good, a source said.

"There's not an onslaught of issues, and it gives people time to focus on what they're working on," he said.

Tuesday's issue from Whirlpool Corp. had some difficulty, a source said.

The issue was $500 million, but the company wanted to upsize it to $1 billion. It also priced wider than talk of 245 to 250 bps, at 260 bps, he said.

"There was something kind of fishy going on there," he said.

Thursday should have similar volume.

"I think there's more in the hopper," a source said.

Another source said they have one upcoming issue in the insurance sector for Thursday.

Computer Science, Avon firm up

A trader said the new Computer Sciences bonds "came and did very well," with both the 5.5% notes due 2013 and the 6.5% notes due 2018 "trading all the way tighter," both of them bid at 265 basis points over comparable Treasuries, offered at 260 bps, versus the respective spreads at pricing - 272 bps for the 5-year and 270 bps for the 10-year, a rare inversion of the credit curve, the trader noted.

The trader also saw the new Avon Products 4.80% notes due 2013 and 5.75% notes due 2018 each tighten to 190 bps bid before going out at 192 bps, still in slightly from the 195 bps level at which both tranches had priced earlier in the session.

He said he'd seen no activity in the new Clorox 5% senior notes due 2013, which had priced at 217 bps over. "Nothing was said."

Apart from the new-issue trading, "spreads widened in the morning on all of the fears" about the economy in general, plus corporate profits and the lingering effects of the credit crunch. But then, he said, "as equities came back, bids [on corporate bonds] came back too," although he added that "a few of [Tuesday's] deals did widen out a little bit."

McDonald's disappoints

He saw McDonald's Corp. "did widen out a little bit" and was "trading behind issue."

Among other recently priced deals, Pacific Gas & Electric's new bonds "remained well bid."

The new UST 5.75% notes due 2018 traded between 187 bps and 182 bps, well in from Tuesday's pricing level of 193 bps over.

The trader said that "most of the focus" was on the new-issue arena.

Among established bonds, "spreads remained fairly well bid for on the secondary stuff because there's just not much of it around."

CDS market not much changed

A trader said that things were fairly quite in the credit-default swaps market, with major bank names 3 bps to 5 bps wider on the day and big thrift Washington Mutual 20 bps wider at 390 bps bid, 410 bps offered.

Interestingly the CDS spreads on the monoline bond issuers moved in divergent directions Wednesday. Ambac Financial Group's AA notes were seen 5 bps tighter, while its AAA bonds were 10 bps wider. MBIA Inc.'s AA bonds were 10 bps tighter, while the AAA issues were 15 bps wider.

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