Jefferies, Williams sell upsized deals; Northrop struggles in trading; Euro bank names watched

By Andrea Heisinger

New York, Nov. 2 - Jefferies Group, Inc. and Williams Partners LP sold bonds on a Tuesday that was otherwise focused on mid-term election results and the start of a two-day Federal Reserve meeting.

Jefferies Group sold a $500 million issue of five-year notes at the tight end of guidance. The size was increased from $350 million.

Another $600 million sale came from Williams Partners. They sold the upsized offering of 10-year notes to help pay for an acquisition.

The split-rated Seminole Tribe of Florida released talk for its sale of seven-year Gaming Division Bonds planned for Wednesday.

The coming day is expected to be light on new deals. As one syndicate source said, "It's basically blocked off the calendar."

It's possible there could be one or two smaller deals either before or after an announcement from the Federal Reserve, he said.

Investment-grade trading volume remained light for the second day in a row, a source said.

"Everyone made bets ahead of the election and Fed, and they're waiting around until [they're over]," he said.

The Federal Reserve meeting concludes on Wednesday, and secondary activity is not expected to increase until Thursday.

The new Williams Partners bonds were quoted moderately tighter once released for trading. They were outdone by the new five-year notes from Jefferies that moved between 5 and 10 basis points better.

The three-tranche sale from Northrop Grumman Corp. on Monday struggled in next-day trading. Two of the three tranches were quoted wider than the pricing level.

Early in the day, Northern Trust Corp.'s 10-year bonds were quoted tighter, but then they disappeared from trading.

"It seems like that's been happening a lot lately," a source said. "We see something in the morning and then it dies in intraday trading."

Traders watch Fed

Volume bounced back slightly to around $9 billion, a trader said. This was more activity than was seen on Monday.

Wednesday is expected to be slow in the secondary market after elections and the conclusion of the two-day Fed meeting.

"There's too much pressure on the Fed announcement," a trader said, adding that there would be more effect on Treasury bonds than corporates.

Treasury bond yields moved tighter after widening on Monday, a source said. The five-year note was seen at 1.16% at the end of the day Tuesday, down 1 bp from the previous day. The 30-year bond did even better as it came in by 8 bps to 3.93%.

Jefferies upsizes to $500 million

Jefferies Group offered an upsized $500 million of 3.875% five-year notes (Baa2/BBB/BBB) at a spread of Treasuries plus 275 bps, a market source away from the sale said.

They priced at the tight end of guidance in the range of 275 to 280 bps. The size was increased from an initial amount of $350 million.

Jefferies & Co. ran the books.

Proceeds are being used for general corporate purposes including further development and diversification of businesses.

Once released for trading, the notes moved in nicely. A trader said the five-year notes were trading at a bid of 267 bps and offer of 265 bps. Another source quoted them wider on the bid side at 269 bps.

The securities and investment firm is based in New York.

Issuers hold back

There were new deals priced for the day but not a lot of excitement in doing so. Both deals were upsized but remained on the smaller side.

"No one was going to price a blockbuster today," a market source said after the close. "There's too many headlines coming out. I think a lot [of issuers] will hold off."

Elections, more mortgage news connected to big banks and coming data announcements at the end of the week have not been ideal for those wishing to price bonds opportunistically.

Most of the week's issuers so far have been firmly BBB rated and looking to finance note repurchases or acquisitions.

"Most of the big deals came after earnings," another source said.

Williams Partners' 10-year

Energy management company Williams Partners priced an upsized $600 million of 4.125% 10-year senior notes (Baa3/BBB-/BBB-) to yield Treasuries plus 153 bps, an informed source said.

The size was increased at the launch from $500 million.

Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and RBC Capital Markets Corp. were the bookrunners.

The proceeds are being used to fund a portion of the cash consideration made in the $782 million acquisition of Midstream Piceance.

In secondary trading, the bonds tightened between 3 and 5 bps, a trader said.

The notes were quoted at a bid of 150 bps and offer of 148 bps, they said. Later, another source said the notes tightened further to 149 bps bid and 147 bps offered.

The owner and operator of energy assets is based in Tulsa, Okla.

Seminole Tribe talks deal

Seminole Tribe of Florida talked its $330 million split-rated offering of first-lien Gaming Division Bonds, series 2010, due 2017 (Ba1/BBB-/BB+) with a 7.75% to 8% yield, according to an informed source.

Pricing is expected on Wednesday.

Bank of America Merrill Lynch has the books for the Rule 144A for life deal.

The notes are secured with a first lien on gaming revenues of Seminole Gaming Division's six properties.

Proceeds will be used to fund capital expenditures and for tribal uses.

The Hollywood, Fla.-based tribal gaming company operates six casinos in that state.

Northrop Grumman trades mixed

Two of the three tranches of bonds from Monday's Northrop Grumman sale moved wider in next-day trading, a source said.

They were not seen trading on Monday because they priced late.

The 1.85% notes due 2015 performed the best after pricing at 70 bps over Treasuries. They were quoted at 69 bps bid, 67 bps offered. A trader said earlier in the day they were even wider at 73 bps bid, 68 bps offered.

This is in contrast to the performance of the 3.5% notes due 2021 that were quoted at 95 bps bid, 93 bps offered. They priced at Treasuries plus 90 bps. In early trading, they were at 96 bps bid, 91 bps offered.

A tranche of 5.05% notes due 2040 moved a couple of basis points wider than its 105 bps price. They were quoted at 108 bps bid, 107 bps offered.

In the morning, the bonds saw a 110 bps bid, a source said.

Northern Trust tightens

A sale of 3.45% notes due 2020 from investment and financial management company Northern Trust tightened in morning trading and then mostly disappeared, a source said.

They were priced at 83 bps over Treasuries and were seen in the morning at 81 bps bid, 75 bps offered. This was tighter than where they were seen after pricing Monday.

"This was a high-quality name that probably got put away since it was only a $500 million deal," a source said. "No one's flipping it."

Euro banks seen vulnerable

Overseas banking names like HSBC, UBS and Deutsche Bank are seen as some to watch as their credit default swaps widen, a trader said late in the day.

They are back in the headlines over a renewed fear of debt problems.

"They hold a lot of sovereign debt," the source said.

There hasn't been an immediate impact, but the source called it "something to watch" as increased volatility could affect the bond market.

Financials among most active

Bonds from Countrywide Financial Corp. and Citigroup Funding Inc. were some of the most actively traded in the high-grade market for the day.

News had come out Monday that Citigroup was less affected by foreclosures than other banking names because it had less exposure to mortgages, a source said.

The Citigroup bond seeing trading action was the 2.125% bond due 2012.

A 5.8% issue due 2012 from Countrywide was one of the most traded of the day, a source said. It was quoted at 193 bps.

"Countrywide is always in the news," a source said as a possible reason why there was increased activity in this bond.

Rio Tinto Finance (USA) Ltd.'s $2 billion deal from the previous week also remained active.

Both the 3.5% bonds due 2020 and the 5.2% due 2040 were trading at decent volumes. A source said all three tranches of the sale remained tighter than where they priced on Oct. 28.

Paul A. Harris contributed to this report

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