Nabors Industries announces reopening; new deal flow sluggish despite equity boost; Walgreen tighter

By Andrea Heisinger and Paul Deckelman

Omaha, July 17 - Although a sense of stability remained in the bond market Thursday, it wasn't apparent from the amount of new issues.

There were none to speak of, sources said, with lack of supply or financial blackouts the likely culprits and not a negative tone.

News of losses from names like Merrill Lynch & Co. - which posted a $4.9 billion quarterly deficit - didn't drag the market down too much, a source said.

"There were no deals, but it was a good market," he said.

In the investment-grade secondary market Thursday, advancing issues continued to trail decliners by a more than five-to-four ratio, while overall market activity, reflected in dollar volumes, fell about 12% from Wednesday's pace.

Spreads in general were seen tighter, in line with higher Treasury yields; for instance, the yield on the benchmark 10-year issue increased 6 basis points to 3.99%.

Traders saw several recently priced deals firming on Thursday, particularly Walgreen Co., as well as PPL Energy Supply and CRH America.

Among the established issues, International Business Machines Corp.'s bonds were better after the giant computer maker reported solidly positive second-quarter numbers.

Nabors plans reopening

Nabors Industries Inc. announced in a press release Thursday that it had started the reopening of a previous issue of 10-year notes.

Market sources said they hadn't seen the reopened notes price Thursday.

The drilling and oil rig company is reopening its 6.15% 10-year senior unsecured notes to add $750 million.

This will bring the total to $1.325 billion, including $575 million priced Feb. 14.

Both the original and reopened notes are pricing under Rule 144A.

Citigroup Global Markets Inc. and UBS Capital Markets are bookrunners, a market source said.

Liquidity need, tone prompted PPL deal

Wednesday's issue from PPL Energy Supply, LLC went very well, said George E. Biechler, a company spokesperson, via e-mail.

The company issued $300 million of 6.3% five-year notes priced at a spread of Treasuries plus 315 basis points.

"There was a lot of interest," he said, "with many high-quality investors in the book."

PPL Energy Supply decided to issue Wednesday due to a combination of the need for liquidity and the tone of the market, he said.

The decision to go for the five-year notes was primarily to stagger maturities, he said, as the company issued $400 million of 10-year notes earlier this year.

Friday seen quiet

Regardless of how the market looks Friday, it's unlikely there will be any issuance, a source said.

"It's a good market are far as equities are concerned," a source said. "There was nothing today but a bunch of tumbleweeds, though."

Some after-hours earnings numbers will likely guarantee an issuance void Friday, he said, where they will likely affect how the market opens.

"We'll see how things start out tomorrow," he said. "Oil is down, so that helps, but it will probably be even more dead tomorrow [than Thursday]."

CRH, PPL deals tighten up

Among recently priced issues, a trader said that the new CRH America 8 1/8% notes due 2018 were trading at 415 bps bid, 410 bps offered. That was modestly firmer than the 420 bps spread over comparable Treasuries at which the company priced its $650 million issue of notes on Wednesday.

He also saw PPL Energy Supply's new 6.30% notes due 2013 trading at 305 bps bid, 300 bps offered, versus the 315 bps spread at which the $300 million of new bonds had priced on Wednesday."

Walgreen is tonic for the market

But it was the new Walgreen 4.875% notes due 2013 that stood out. The Number-One U.S. drugstore operator's new bonds "was the most active" issue late in the day.

The company had priced $1.3 billion of the bonds on Monday at 175 bps over Treasuries, "and they just sat there," straddling the 170 bps mark, at levels like 173 bps bid, 169 bps offered.

But then on Thursday, he said, "they just took off ", and had firmed to 168 bps bid, 162 bps offered.

As to what was behind the sudden surge, he said that there was no obvious reason. "I think all the bonds dried up, and with the market going down, everyone wanted this new name on their books," he theorized.

Market watches earnings

The trader said that "people are looking at earnings more than anything else. Equity earnings are popping up all over the place," including such end of the day names as Microsoft Corp., Merrill Lynch & Co., and IBM.

Armonk, N.Y.-based IBM recorded a handsome 22% jump in second-quarter profits versus year- earlier levels, and handily beat Wall Street's earnings expectations.

Not surprisingly, its bonds pushed upward, with the actively traded 5.70% notes due 2017 trading at 154 bps bid, 150 bps offered post-news, versus pre-news levels around 160 bps bid, 155 bps offered.

J.P. Morgan buoys financials

Also reporting quarterly earnings was J.P. Morgan Chase & Co. Not surprisingly for a big bank with heavy exposure to the problem-plagued mortgage sector, profits were off by slightly more than half from year-earlier levels. However, that decline was less than what Wall Street was looking for, so the financial sector gained some strength.

While J.P. Morgan's own bonds were little moved - its 6.40% bonds due 2038 were quoted steady at about 225 bps over - other financial names got a boost, including Wells Fargo & Co., which had reported positive numbers on Wednesday, and even the troubled thrift Washington Mutual. Wells Fargo's 4.625% notes due 2010 were quoted having come in by about 30 bps to the 170 bps mark, while WaMu's 5.125% notes due 2015 traded at about 800 bps off, around 30 bps tighter on the session.

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