Goldman, Newell Rubbermaid, Energy Transfer, Credit Suisse, MidAmerican price; financials trickle back

By Andrea Heisinger and Paul Deckelman

Omaha, March 25 - Following a busy start to the week, the pace of new investment-grade deals slowed slightly Tuesday. But the market still saw issues price from Goldman Sachs Group, Newell Rubbermaid Inc., Energy Transfer Partners, LP, Credit Suisse, acting through its Guernsey branch, and MidAmerican Energy Holdings Co.

The day marked the return of large issues from financials, following a period of stability.

In the investment-grade secondary market Tuesday, advancing issues outnumbered decliners by a four-to-three ratio, while overall market activity, reflected in dollar volumes, jumped by 45% from Monday's levels.

Treasury yields narrowed solidly, with the benchmark 10-year notes gaining to 3.50%, some 5 bps narrower on the day.

The new Goldman Sachs 10-year issue grabbed the secondary spotlight, tightening 3 to 5 bps from its pricing levels. However, the company's existing bonds were wider.

Bear Stearns Cos. bonds continued to tighten in response to the sweetened terms that JP Morgan Chase is offering for the beleaguered Bear.

Besides the cash bonds, Bear's credit-default swap debt-protection costs also continued to narrow.

Credit Suisse hugely upsized

Credit Suisse priced a massively upsized $1.4 billion of 7.9% perpetual Tier 1 capital notes at par of $25.

The issue was increased from $300 million.

The $25 par notes priced tighter than talk of 8% area, sources said.

Credit Suisse Securities LLC, Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Inc. and Wachovia Capital Securities LLC were bookrunners.

Goldman prices at tight end

Goldman Sachs priced $2.5 billion of 6.15% 10-year global notes at 99.816 to yield 6.175% with a spread of Treasuries plus 270 basis points.

This was at the tight end of price talk of 270 to 275 bps, a source close to the deal said.

Goldman Sachs & Co. was bookrunner.

The issue carried about a 20 bps new issue premium, a market source said.

This is low for a financial issuer right now, but Goldman can get away with it because it paid a 40 to 50 bps new issue premium for a recent issue, the source said.

A sell-side source said most issuers are paying a 40 to 50 bps new issue premium now compared to 25 to 30 bps in September and 10 to 15 bps a year ago for a BBB rated name.

There was not a specific reason financials chose today to get back into the market following the JPMorgan and Bear Stearns buyout deal, a source said.

"It wasn't a particularly great day," he said. "Futures were kind of flat this morning, but a window has opened for issues and I think people just wanted to get in."

Another source said many simply waited until this week because of limited chances to get into the market last week.

"The volatility in the stock and credit markets last week was why we didn't see a lot," he said. "We have some stability now."

MidAmerican brings $650 million

Financials weren't the only issuers in the market Tuesday.

MidAmerican Energy priced $650 million in 5.75% 10-year senior notes at 99.819 to yield 5.774% with a spread of Treasuries plus 225 bps.

Bookrunners for the Rule 144A deal were Barclays Capital Inc., Lehman Brothers Inc., RBS Greenwich Capital and Wachovia.

Newell Rubbermaid priced $750 million of notes in two tranches.

The $500 million 5.5% five-year notes priced at 99.809 to yield 5.543% with a spread of Treasuries plus 295 bps.

This was at the tight end of price talk of 300 bps area.

The $250 million of 6.25% 10-year notes priced at 99.701 to yield 6.29% with a spread of Treasuries plus 280 bps.

This was also at the tight end of talk of 285 bps area.

Barclays, Citigroup Global Markets Inc. and Goldman Sachs were bookrunners.

Energy Transfer sells $1.5 billion

Energy Transfer Partners priced $1.5 billion senior notes in three tranches.

The $350 million of 6% five-year notes priced at 99.811 to yield 6.045% with a spread of Treasuries plus 345 bps.

The $600 million of 6.7% 10-year notes priced at 99.706 to yield 6.742% with a spread of Treasuries plus 325 bps.

The $550 million of 7.5% 30-year notes priced at 99.956 to yield 7.59% with a spread of Treasuries plus 330 bps.

Wachovia, Credit Suisse, J.P. Morgan Securities Inc. and UBS Investment Bank were bookrunners.

Terms were released Tuesday for two of Monday's issues.

Questar Gas Co. priced $150 million in two tranches.

The $50 million of 6.3% 10-year notes priced at 99.940 to yield 6.308% with a spread of Treasuries plus 275 bps.

The $100 million of 7.2% 30-year notes priced at 99.937 to yield 7.205% with a spread of Treasuries plus 285 bps.

Barclays and J.P. Morgan were bookrunners.

International Lease Finance Corp. priced a $100 million add-on to its recent $900 million issue of medium-term notes.

The 6.375% five-year notes priced at 99.894.

Citigroup, Credit Suisse, J.P. Morgan and HSBC Securities Inc. were agents.

More deals expected

Issuers should continue to come to the market this week, at least through Thursday, sources said.

"There are a lot lined up, and I think we'll continue to see them tap the market," he said.

Financials, especially, should continue to trickle back into new issues.

"There's been a lot of CDS tightening in brokerage names," a source said. "I think we'll see a lot of financials coming back with this window we have."

The market hasn't made up for the drop in Treasury yields, the sell-side source said.

Whereas the high-yield market has overshot Treasuries, the investment-grade market has not.

The coupons that investment-grade issuers are paying is not looking that bad, which is why there hasn't been much of a drop in issuance, the source said.

New Goldmans tighten up

A trader saw the new Goldman Sachs 6.15% global notes due 2018, which had priced earlier in the session at a spread of 270 bps over comparable Treasuries, trading later in the day at 265 bps bid, 263 bps offered.

Another trader also saw the bonds trade as narrow as 265 bps, although he said that after that they backed up a little to end the day at 267 bps bid, 265 bps offered.

The $2.5 billion mega-deal pushed Goldman's existing bonds lower - a market source saw its 5.95% notes due 2018 widening out by several basis points to 252 bps. Its 6.75% bonds due 2037 were also easier on the day, the spread rising to 291 bps.

Bear continues to firm

Bear Stearns' bonds "were up pretty much across the board," one of the traders said.

For instance, its 5.70% notes due 2014 were seen having tightened some 75 bps on the day to around 300 bps. The trader said that its 10-year bonds, "in dollar-price terms, were at 103 to 104 - up about 1 or 2 points from the gyrations of [Monday]."

A market source said that Bear's 10-year notes - which ballooned out to spreads above 800 bps before the JP Morgan buyout was announced - had tightened to 350 bps over as of Monday, and came in about another 30 bps Tuesday to 322 bps.

Another trader called Bear Stearns' CDS spread "about 15 [bps] better - it just keeps improving," moving down to about 165 bps bid, 185 bps offered.

In general, he said, "credit spreads keep improving." He saw the debt-protection costs of major banks about 3 bps to 5 bps better, while thrift operator Washington Mutual's CDS spread tightened by 25 bps.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.