Teppco, Potomac Electric, Texas Gas, Cooper, CSX, Hershey price; stable issue window opens

By Andrea Heisinger and Paul Deckelman

Omaha, March 24 - A long holiday weekend led into a busier than expected Monday with issues from Teppco Partners, LP, Potomac Electric Power Co., Texas Gas Transmission, LLC, Cooper US, Inc., CSX Corp. and The Hershey Co.

Traders are also predicting the healthy volume of trading to carry into Tuesday.

Stable conditions fueled Monday's new issues, surprising some with the amount.

"It was busier than we thought it would be," a source said.

In the investment-grade secondary market Monday, declining issues outnumbered advancers by a five-to-four ratio, while overall market activity, reflected in dollar volumes, rose by 18.5% from Thursday's dull, abbreviated pre-holiday break levels.

Treasuries weakened sharply, with the benchmark 10-year note ballooning out to 3.51%, some 18bps weaker on the day.

Bear Stearns Cos.' bonds tightened spectacularly on the news that JP Morgan Chase had improved its offer for Bear's shares five fold, raising it to $10 from the $2 per share that was announced a week ago but quickly denounced by angry Bear shareholders as inadequate

Bear's credit-default swaps also came in markedly, along with other financial names, including credit-protection costs for JP Morgan.

CSX sells $1 billion

CSX priced $1 billion in two tranches.

The $600 million 6.25% seven-year tranche priced at 99.943 to yield 6.26% with a spread of Treasuries plus 337.5 basis points.

The $400 million 7.45% 30-year tranche priced at 99.927 to yield 7.456% with a spread of Treasuries plus 310 bps.

Barclays Capital Inc., Citigroup Global Markets Inc., Credit Suisse Securities LLC and Morgan Stanley & Co. Inc. were bookrunners.

Teppco at tight end of talk

Teppco also priced a $1 billion issue, but in three tranches.

The $250 million of 5.9% five-year notes priced at 99.922 to yield 5.917% with a spread of Treasuries plus 330 bps.

The $350 million of 6.65% 10-year notes priced at 99.64 to yield 6.699% with a spread of Treasuries plus 315 bps.

The $400 million of 7.55% 30-year notes priced at 99.451 to yield 7.596% with a spread of Treasuries plus 325 bps.

All of the notes priced at the tight end of talk, which was 330 to 340 bps for the five-year tranche, 315 to 325 bps for the 10-year tranche and 325 to 335 bps for the 30-year tranche.

Bookrunners were UBS Investment Bank, J.P. Morgan Securities Inc., SunTrust Robinson Humphrey and Wachovia Capital Securities LLC.

Potomac reopens

Potomac Electric reopened its 6.5% 30-year senior notes to add $250 million.

Total issuance is now $500 million, including $250 million issued Nov. 16, 2007.

The notes priced at 96.917 to yield 6.741% with a spread of Treasuries plus 245 bps.

Citigroup and J.P. Morgan were bookrunners.

Texas Gas also priced $250 million of 5.5% five-year notes via Rule 144A/Regulation S.

According to a press release, proceeds will be used to fund a portion of expansion projects.

Credit Suisse, J.P. Morgan and Wachovia were bookrunners.

Cooper US, a subsidiary of Cooper Industries Ltd., priced $300 million of seven-year senior notes late in the day.

The notes priced at 262.5 bps, a market source said, and full terms were not available at press time.

Deutsche Bank Securities Inc., J.P. Morgan and UBS ran the books.

Hershey priced $250 million of 5% five-year notes at 99.488 to yield 5.117% with a spread of Treasuries plus 250 bps.

Citigroup and UBS were bookrunners.

Credit Suisse, Questar plan offerings

Other deals were announced Monday but did not price, sources said.

Credit Suisse announced is will issue Tier 1 capital notes, according to a 424B2 Securities and Exchange Commission filing.

A market source said the notes have talk of 8% area coupon and are non-callable for five years.

Bookrunners are Credit Suisse, Citigroup, Merrill Lynch, Pierce, Fenner & Smith Inc. and Wachovia.

Questar Gas Co. also announced an issue of notes, via a 424B5 Securities and Exchange Commission filing.

The issue launched in two tranches of 10 and 30-year notes but did not price, a market source said.

The company launched $50 million of 10-year notes at Treasuries plus 275 bps and $100 million of 30-year notes at Treasuries plus 285 bps.

Barclays Capital Inc. and J.P. Morgan are bookrunners.

Active day seen Tuesday

Conditions remained favorable at the end of the day Monday, which combined with a one-day window of trading last week could lead to a busy day Tuesday.

"It should be less busy than today," a market source said. "We have stuff, but today was busier than expected - than a lot of people were expecting."

One trader said she had a busy calendar for Tuesday, while another said he had "a few issuers looking at the market tomorrow."

Positive headlines surrounding JPMorgan and Bear Stearns boosted stability, a source said.

"We've seen spreads significantly move tighter and issuers want to take advantage of that," he said. "We're seeing the beginning of a stable issue window and people don't know what will happen next so they're getting in now."

Bullish on Bear

A market source saw Bear Stearns' 5.55% notes due 2017 having narrowed some 200 basis points during the session to 274 bps over the 10-year Treasury, versus Thursday's closing level around 475 bps.

Another market source pegged the Bear Stearns 6.40% notes due 2017 at 310 bps over, versus 473 bps late Thursday, and called its 4.55% notes due 2010 an eye-popping 287 bps narrower at 582 bps, in from 869 bps late Thursday.

A trader saw Bear's 2 7/8% notes due on July 2 at 98 bid, for a yield of 10.59% and a 945 bps spread, both well down from recent levels the bonds occupied, including a dollar-price as low as 77 bid.

A trader said that Bear Stearns' credit-protection costs came in by 160 bps to 180 bps bid, 200 bps offered.

He saw JP Morgan's CDS cost improve by 17 bps to 85 bps bid, 95 bps offered.

In general, he said, major bank CDS costs came in "by anywhere from 70 bps to 17 bps." Major brokerage names "were in pretty strong too."

Non-Bear names are mixed

However, despite that strength in Bear Stearns' debt, other names, including some financials, were struggling.

Merrill Lynch's 6.40% notes due 2017 widened out to 294 bps.

Among the non-financial names, Verizon Communications' 6.40% bonds due 2038 widened out to 209 bps.

However, Weatherford International's new 10-year bonds, which priced last week at 270 bps over, were seen Monday trading as tight as 241 bps, a market source said.

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