Virgin Media unit sells paper as others step back; Kinder Morgan Energy, oil/gas bonds mixed

By Andrea Heisinger and Cristal Cody

New York, Feb. 24 - Virgin Media Secured Finance plc was the only non-asset-backed issuer in the high-grade market on Thursday as sales dropped off sharply from the previous day.

The unit of the entertainment company Virgin Media sold $500 million of notes due 2021 as part of a sterling-denominated deal with one other tranche. It was a private sale that went overnight from Wednesday and priced at the tight end of talk.

The day wasn't supposed to be so quiet, a source said after the close. Market conditions at the top of the day were less than ideal for anyone to dip a foot in the market, she said.

"There were a lot of go, no-go [calls] this morning, and we decided it was just not a supportive market," the source said.

Another source at a small syndicate desk agreed and said that although they had nothing on the calendar for the day, they had heard away that issuers held back on news about oil prices, tensions in Libya and earnings from Freddie Mac. Freddie reported a loss of $113 million in the fourth quarter.

The first source mentioned that, generically, bonds were 5 basis points to 20 bps wider, and things were volatile enough to prevent the launch of transactions.

Friday is expected to be quiet as companies hold off until Monday or later in the coming week to sell paper. A source said the top of the next week is expected to be busy.

Oil and gas bonds were beginning to settle, though some bonds continued to widen, a trader said.

"Flows were very balanced. If anything, things are unchanged to slightly wider," the trader said.

Houston-based Marathon Petroleum Corp.'s 6.5% bonds due 2041 traded 5 bps wider, but Occidental Petroleum Corp.'s bonds "are basically unchanged today," the trader said.

Kinder Morgan Energy Partners, LP's bonds sold the previous day were mixed in trading, with the 10-year note firmer and the 30-year bond wider, a trader said.

Wyndham Worldwide Corp.'s notes were wrapped around the sale price in trading, a source said.

The Markit CDX Series 14 North American investment-grade index firmed 1 bps to a spread of 85 bps, according to Markit Group Ltd.

Overall investment-grade Trace volume edged up about 6% to nearly $14 billion.

Treasuries were stronger on Thursday, especially on the longer end of the curve, as investors sought safer havens for debt from the turmoil in the Middle East and North Africa.

The 10-year note yield fell 3 bps to 3.45%. The 30-year bond yield dropped 4 bps to 4.54%.

Virgin Media $500 million

Virgin Media Secured Finance sold $500 million of 5.25% 10-year senior secured notes (Baa3/BBB-/BBB-) early in the day at Treasuries plus 187.5 bps, according to a source away from the sale and a press release.

The notes priced at the tight end of guidance given late on Wednesday at 187.5 bps to 200 bps.

The deal totaled the equivalent of £957 and also included a £650 sterling-denominated tranche.

The securities were priced under Rule 144A and Regulation S.

BNP Paribas Securities Corp. and Deutsche Bank Securities Inc. were active bookrunners.

Proceeds are being used to repay portions of A and B tranches under a senior credit facility.

The unit of entertainment company Virgin Media Inc. is based in London.

Kinder Morgan Energy mixed

The two tranches of $1.1 billion of senior notes (Baa2/BBB/BBB) that Kinder Morgan Energy Partners sold on Wednesday were mixed in trading, with the short bond tightening, a trader said.

The 3.5% five-year notes, which priced at a spread of Treasuries plus 135 bps, firmed to 125 bps bid, 121 bps offered.

The second tranche of 6.375% 30-year bonds priced at 180 bps over Treasuries. The bonds moved out in the secondary to 186 bps bid, 181 bps offered.

The pipeline is based in Houston.

Wyndham Worldwide active

A trader said the new issue from Wyndham Worldwide was "higher in price than the issue price, but right around the same spread" at 99 ½ bid, 99 5/8 offered.

The Parsippany, N.J.-based hospitality company on Wednesday sold $250 million of split-rated 5.625% 10-year notes (Ba1/BBB-) to yield 225 bps over Treasuries.

Bank, broker CDS flat

The costs of bank/broker credit default swaps and the cost of CDS to protect holders of brokerage house/investment bank paper was flat on Thursday, a source said.

A source saw bank CDS costs even to 1 basis point wider. The CDS costs for brokers were quoted at even to 1 bp tighter.

Stephanie N. Rotondo contributed to this review

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