Verizon, Kroger, Delmarva Power, Noble, SoCal Gas, Westar price deals as backlog empties; Kroger trades tighter

By Andrea Heisinger and Paul Deckelman

New York, Nov. 18 - The investment-grade new issue market showed glimmers of its former self Monday as Verizon Wireless, Kroger Co., Delmarva Power & Light Co., Noble Holding International Ltd., Southern California Gas Co. and Westar Energy, Inc. all priced deals.

This was the largest number of issues the primary had seen since the financial meltdown began.

In the investment-grade secondary market Tuesday, advancing issues led decliners by a four-to-three ratio. Overall market activity, reflected in dollar volumes, was up 30% from Monday's pace.

Spreads in general were seen wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year issue fell by 12 basis points to 3.53%.

Some of the new issues which priced came early enough to make it into aftermarket dealings, including the Kroger and Delmarva Power deals.

Other recently priced deals seen trading around included British Sky Broadcasting Group plc and Alabama Power Co.

Verizon prices two tranches

Verizon Wireless priced $3.5 billion in five and 10-year tranches totaling $3.5 billion.

The $1.25 billion tranche of 7.3755 five-year notes priced at 99.185 to yield 7.57% with a spread of Treasuries plus 537.5 basis points.

The $2.25 billion of 8.5% 10-year notes priced at 98.935 to yield 8.662% with a spread of Treasuries plus 512.5 bps.

Both tranches priced at the tight end of talk, which was 537.5 to 550 bps for the five-year notes and 512.5 to 525 bps for the 10-year notes.

Banc of America Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc. and Morgan Stanley were bookrunners.

Kroger prices upsized deal

Grocery store chain Kroger priced an upsized $600 million of 7.5% five-year notes at 99.808 to yield 7.549% with a spread of Treasuries plus 535 bps.

The size was increased from $500 million.

Bookrunners were Goldman Sachs and J.P. Morgan Securities.

Southern California Gas does five-years

Southern California Gas priced $250 million of 5.5% five-year first mortgage bonds at 99.849 to yield 5.535% with a spread of Treasuries plus 332 bps.

BNP Paribas Securities, Calyon and J.P. Morgan ran the books.

Noble prices $250 million

Offshore drilling company Noble Holding International priced $250 million of 7.375% five-year senior notes at 99.695 to yield 7.449% with a spread of Treasuries plus 525 bps.

Bookrunners were Goldman Sachs, Citigroup Global Markets and SunTrust Robinson Humphrey.

Delmarva Power prices $250 million

Electric company Delmarva Power & Light priced $250 million 6.4% five-year first mortgage bonds at 99.795 to yield 6.448% with a spread of Treasuries plus 420 bps.

Banc of America Securities, J.P. Morgan, KeyBanc Capital Markets, Morgan Stanley and Scotia Capital ran the books.

Westar deal upsized

The issue of first mortgage bonds from Westar Energy was increased to $300 million from $250 million, a source close to the deal said.

The 8.625% 10-year notes priced to yield 8.75% with a spread of Treasuries plus 521.3 bps.

They were launched and priced at a yield, the source said, with the coupon set to give a discounted price.

J.P. Morgan Securities and Deutsche Bank Securities were bookrunners.

Issuance may slow

The amount of new deals Tuesday was encouraging, but some sources warned things may slow down as the existing backlog is gone through.

"We got quite a bit out the door this week," a source said. "We already priced three issues in two days."

He added that they had "cleared most of their calendar" but that some other syndicate desks still had potential issuers for the week.

The "constructive tone" appeared to be waning slightly Tuesday, he said, as the secondary and other economic factors weighed on the primary.

This remains one of few remaining weeks for companies to issue before the end of the year, which may push some deals through.

"It's just hard to tell," he said. "We had a bunch of issuers today, but there's only so much to come out."

Kroger, Delmarva trade around

A trader saw the new Kroger 7.50% notes due 2013 trading at a spread over comparable Treasuries of 525 bps bid, 520 bps offered, having tightened from the 535 bps over level at which the supermarket operator priced its $600 million of bonds earlier in the session.

But while Kroger firmed solidly, extending a recent trend of new issues moving up soon after pricing, Delmarva Power & Light's new 6.40% notes due 2013 were seen little changed from their 420 bps over pricing spread, quoted in the afternoon at 420 bps bid, 415 bps offered.

The trader did not see any secondary activity in the new Verizon, Westar Energy or Southern California Gas deals.

BSkyB widens out

British Sky Broadcasting's new 9.50% notes due 2018 were seen having widened out from the 587.5 bps over level at which the media company priced its $600 million of new bonds on Monday; by Tuesday morning, they were trading at 605 bps bid, 585 bps offered.

Alabama Power holds steady

Alabama Power's new 5.80% notes due 2013 were seen by a trader at 355 bps bid, 345 bps offered, versus the 355 bps level at which the Southern utility company priced its $250 million of new bonds on Friday.

Bud bonds hang in

Among established issues, a trader saw Anheuser-Busch Cos. Inc.'s bonds little changed on the day, unmoved by the news that international brewing giant InBev on Tuesday announced the formal completion of its $52 billion acquisition of St. Louis-based Anheuser-Busch, the venerable brewer of the iconic Budweiser brand and other well-known beers.

He saw its 2012 bonds "not much changed" at 455 bps over.

HP tightens on good guidance

The trader also saw Hewlett Packard Co.'s paper "in maybe a couple" of basis points, tightening a little on the Palo Alto, Calif.-based computer and printer maker's positive fourth-quarter outlook. Its 4½% notes due 2013 were being offered at 305 bps over, versus Monday's 310 bps over level.

The company said Tuesday that it expects earnings of 84 cents per share and adjusted earnings of $1.03 per share for the three months ended in October; the latter projection is a little better than the roughly $1 per share that Wall Street has been looking for. It also guided revenue projections above analysts' consensus estimates.

It will release its full results on Nov. 24.

However, other tech-oriented names got no lift from that good news; recently acquired HP subsidiary Electronic Data Systems' 7.45% bonds due 2029 were 35 bps wider, at around the 420 bps mark, while Xerox Corp.'s 6.35% notes due 2018 were seen having widened out by some 50 bps on the day to around the 690 bps mark.

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