Bank of NY Mellon, Hospira, RBS Group price, Dow Chemical mulls issue; Hospira up in trading

By Andrea Heisinger and Paul Deckelman

New York, May 5 - The comfortable level of new deals continued Tuesday with sales by Bank of New York Mellon Corp., Hospira, Inc. and The Royal Bank of Scotland Group.

The market took a little breather to recover from a busier day before, a source said.

Dow Chemical Co. announced in a press release that it is considering a senior note sale, although there was no word on when it might come to the market.

In the secondary sphere on Tuesday, a market source said the CDX Series 12 North American high-grade index was tighter by 2 basis points, at a mid bid-asked spread level of 157bps.

Advancing issues led decliners by a ratio of better than four to three.

Overall market activity, reflected in dollar volumes, jumped about 50% from Monday's levels.

Spreads in general were seen little changed, in line with generally steady Treasury yields; for instance, the yield on the benchmark 10-year note inched up to 3.16%.

The new Hospira bonds tightened solidly when they were freed for aftermarket dealings. Meanwhile, Bank of New York Mellon's two-part issue firmed modestly.

Bank of NY plans TARP repayment

The Bank of New York Mellon sold $1.5 billion of bonds in two tranches, with plans to use proceeds to partially repay preferred stock and warrant funding from the U.S. Treasury under the Troubled Asset Relief Program.

The bank is one of a handful that has taken this step by issuing bonds not backed by the Federal Deposit Insurance Corp.

The $1 billion of 4.3% five-year notes priced at Treasuries plus 225 bps, while the $500 million of 5.45% 10-year notes sold at Treasuries plus 230 bps.

Both came in tighter than talk levels of 230 bps for the five-year notes and 235 bps for the 10-year tranche, a market source said.

Bank of New York plans to repurchase 3 million shares of preferred stock and/or the warrants for 14,516,129 shares of common stock bought by the Treasury, with the repayment subject to regulatory approval.

Banc of America Securities, Credit Suisse Securities and Deutsche Bank Securities were bookrunners.

"We are pleased with the strong investor demand for and favorable pricing of this debt offering given the current market environment," said Thomas P. Gibbons, chief financial officer of Bank of New York Mellon, in a news release.

RBS sells $7 billion

The Royal Bank of Scotland Group priced $7 billion in two tranches of notes backed by the government of the United Kingdom.

The $4.5 billion of 2.625% three-year notes priced at a spread of Treasuries plus 125.5 bps. A second, $2.5 billion tranche of three-year floating-rate notes priced at par to yield three-month Libor plus 70 bps.

Both were sold via Rule 144A.

RBS Securities was bookrunner for the deal from the financial services company which is based in Edinburgh, Scotland.

Hospira prices small deal

Specialty pharmaceutical and medication delivery company Hospira sold $250 million of 6.4% six-year notes early Tuesday at Treasuries plus 437.5 bps.

The company, based in Lake Forest, Ill., is using proceeds for purposes including debt repayment.

Banc of America Securities LLC and Morgan Stanley & Co. were bookrunners.

Dow considers note sale

Dow Chemical is considering a benchmark-sized sale of senior unsecured notes, according to a press release from the company announcing a common stock share offering.

The notes would be sold in a public offering, with the transaction subject to market conditions.

It would be "an interesting deal" if it gets done, a syndicate sources said, adding that "it would be one that would be watched, for sure."

GE Capital gives two deal terms

General Electric Capital Corp. sold more bonds backed by the Federal Deposit Insurance Corp., and then added to them.

The financing arm of General Electric - based in Fairfield, Conn. - sold $1 billion of floating-rate notes due 2012 on April 30 at par to yield three-month Libor flat. It then added $500 million to the notes on May 1, pricing them at 100.049 with a coupon of three-month Libor plus 0 bps.

J.P. Morgan Securities was bookrunner for the original issue, and for the addition was joined by Morgan Stanley & Co.

Issuance not slow ahead of stress tests

The airing of government stress tests on the country's 19 largest banks on Thursday isn't affecting issuance in the days before, a market source said late Tuesday.

In fact, Wednesday is set to be one of the busiest days of the week.

The stress test results were originally to be released Monday until some banks convinced the government to push that back a couple of days. News came out soon after that 10 of the 19 banks had failed the tests.

"Don't think that wasn't done on purpose," the source said of the delay in the release of the results. He was referring to it being done at the end of the week rather than the beginning.

As for the actual results' impact, it's difficult to tell what they will be on the corporate bond market.

"I'm not sure it will affect our business specifically," he said. "It's going to move the market in some way, but it's hard to tell. I'm sure it will have some sort of negative impact."

High grade shows recovery signs

After spreads widened to unprecedented levels at the end of 2008 and beginning of this year, that trend is starting to subside somewhat, a source said.

Investor interest has also been strong as of late, with the recent International Paper Co. deal clocking in at four times oversubscribed, and the Whirlpool Corp. deal sold in the latter half of April going at "such a tight spread than we thought we'd see," the source said.

And issuance isn't likely to slow much - in spite of negative factors such as headlines and impending bank stress tests.

Wednesday is set to be "a bit busier" than Tuesday, the source said. Tuesday was "recovering from Monday," he added.

Hospira heads higher

When the new Hospira 6.40% notes due 2015 were freed for secondary dealings, a trader saw the $250 million of notes having come in to a spread over comparable Treasury issues of 402 bps bid, 395 bps offered. That was considerably tighter than the 437.5 bps spread at which the Lake Forest, Ill.-based pharmaceutical company had priced those bonds earlier in the session.

BNY Mellon bonds seen better

Another one of the day's new deals, for Bank of New York Mellon, was seen having tightened modestly when the two tranches of bonds were freed for secondary activity.

A trader saw the New York-based financial services company's 4.30% notes due 2014 trading at a spread of 218 bps bid, versus the 225 bps over mark at which the company had priced its $1 billion of new bonds.

Meanwhile, the other part of that $1.5 billion two-part deal, the $500 million of 5.45% notes due 2019, were being quoted at 223 bps bid, also a 7 bps pickup from the level - in this case 230 bps - at which those bonds had priced.

Cigna bonds slightly firmer

Among other recently priced issues, a trader saw Cigna Corp.'s 8.5% notes due 2019 at 525 bps bid, 520 bps offered. The Philadelphia-based health insurance company priced $350 million of the notes on Monday at 537.5 bps, although they subsequently came back in to around 530 bps bid later in Monday's session.

International Paper a little firmer

International Paper Co.'s $1 billion of 9.375% notes due 2019 were seen on Tuesday having firmed a little further to 98.75 bid, 99.125 offered.

The Memphis-based paper producer had priced its bonds on Monday at a dollar price of 97.634, and they had moved up after that in initial secondary dealings to 98.375 bid, 98.625 offered.

Rockwell Collins holds gains

Rockwell Collins Inc.'s 5.25% notes due 2019 were seen by a trader hanging onto the gains the issue had notched since it priced on Friday. He quoted it at 190 bps bid, 180 bps offered - about the levels which those notes had held on Monday.

The Cedar Rapids, Ia.-based avionics company had priced its $300 million of bonds on Friday at 215 bps over, although they tightened solidly on Monday to that 190 bps level.

Little stress over test for bank sector

More generally speaking, a trader said that all of the speculation about which of the 19 big banks that had to take the federal government's "stress test" will be forced to raise more capital did "not really " have much impact on bank bonds, which he called "pretty strong."

The sector had "a pretty strong tone to it" on Tuesday, but there was "nothing outrageous."

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