Wal-Mart, Emerson Electric price issues; volume winds down, relieves syndicate desks; Campbell deal gains

By Andrea Heisinger and Paul Deckelman

New York, Jan. 15 - Concerns over large investment bank names somewhat dragged on the high-grade bond market Thursday, but not enough to prevent Wal-Mart Stores Inc. and Emerson Electric Co. from selling new deals.

It was "a relief" to see a slowdown in issuance, a source said, after the top half of the week was steadily busy.

In the secondary sphere on Thursday, a market source said the widely followed CDX Series 11 North American high-grade index tightened by 4 basis points on the day to a mid bid-asked spread level of 216 bps from 220 bps on Wednesday.

Advancing issues continued to lead decliners, although only by a relatively narrow margin. Overall market activity, reflected in dollar volumes, rose almost 20% from Wednesday's pace. Friday's activity is expected to fall off, given the abbreviated session ahead of Monday's Martin Luther King Day observance, which will see U.S. financial markets closed completely.

Spreads in general were seen little changed, in line with stable Treasury yields; for instance, the yield on the benchmark 10-year issue was about the same at 220 bps.

As has been the case pretty much all week, newly priced issues remained the major focus in the secondary trading arena, traders said, with the new Emerson Electric bonds tightening moderately.

Wednesday deals like Campbell Soup Co. and PepsiCo's Bottling Group LLC continued to trade well - but the new CSX Corp. and R.R. Donnelley & Sons Co. deals lost ground when they moved into secondary.

Emerson increases deal

Emerson Electric upsized its issue of 4.875% 10-year notes to $500 million, a source close to the deal said.

The planned size was unofficially set at $300 million, he said.

The notes priced at 99.619 to yield 4.922% with a 270 bps spread over Treasuries.

The deal, like many others this week and last week, comes with a change-of-control put.

This has made the sales attractive to buyers, a source said. "They're looking for that," he said. "And they also like the 10-year [notes]."

Banc of America Securities LLC and J.P. Morgan Securities Inc. were bookrunners.

Wal-Mart does quick $1 billion

Discount retailer Wal-Mart Stores priced $1 billion of notes in two tranches Thursday.

The deal was announced by late morning and had priced by early afternoon, a source said.

"It was kind of a quick one," he said. "I think they probably knew what they wanted and it was probably pretty presold."

The $500 million of 3% five-year notes priced at 99.537 to yield 3.1% with a spread of Treasuries plus 175 bps. This was considerably under price talk of 200 bps over Treasuries, a source said.

The 4.125% 10-year notes were also $500 million, priced at 99.561 to yield 4.179% with a spread of Treasuries plus 200 bps. This tranche also priced well below talk of 225 bps, a source said.

Banc of America Securities, Barclays Capital Inc., J.P. Morgan Securities and Deutsche Bank Securities were bookrunners.

Met Edison gives terms

A subsidiary of FirstEnergy Corp., Metropolitan Edison Co., released terms for an issue of senior notes priced Wednesday.

According to an FWP Securities and Exchange Commission filing, the electric company priced $300 million 7.7% 10-year notes at par to yield 7.7% with a spread of Treasuries plus 550.2 bps.

Banc of America, Goldman Sachs & Co. and Scotia Capital were bookrunners.

KfW announces pricing

Germany's KfW released terms Thursday for its second dollar-denominated issue in two weeks.

The $3 billion deal of one-year floating-rate notes priced Tuesday at par to yield three-month Libor plus 5 bps.

Credit Suisse Securities and Greenwich Capital Markets ran the books for the offering.

Morgan Stanley upsizes FDIC tranche

Morgan Stanley upsized a tranche of its FDIC-backed notes after pricing Wednesday, according to a second FWP Securities and Exchange Commission filing filed Thursday.

The bank holding company originally priced $4.5 billion in three tranches after adding a $250 million floating-rate part.

They also increased the size of a second tranche of floaters from $1.25 billion to $1.4 billion.

Morgan Stanley ran the books for the deal that originally totaled $4.5 billion.

Desks hope issuance over

Syndicate sources said Thursday they were happy that a slowdown finally happened in the primary.

"It wasn't very good today," one source said. "I think some of the headlines and a lack of calendar finally slowed things."

Although JPMorgan Chase reported a slight profit Thursday, an announcement made six days ahead of schedule, there were fresh worries about other names' need and ability to raise capital, notably Bank of America.

The Citigroup and Morgan Stanley saga is also continuing, but a source said that really didn't seem to affect things much.

"The deals we had were mostly good ones, so it was hard to tell if the [pricing] was affected," he said.

After hopes of a slowdown Wednesday were dashed, it was a relief to some to get a break Thursday.

"We had a lot of stuff this week," a source said.

Friday likely quiet

An early market close and an end to a busy week will likely mean a quiet Friday, a source said.

There is little remaining on calendars, and although there could be a surprise deal or two, it's unlikely there will be a massive FDIC deal pricing, or a large corporate.

"I think we've seen about all for the week," a source said. "It will probably be busy Tuesday. I don't know if the inauguration will affect things or not."

Emerson Electric elevated

When the upsized new Emerson Electric Co. 4.875% notes due 2019 were freed for secondary dealings, a trader saw those bonds bid at 260 bps, in from the 270 bps spread at which the $500 million issue had priced earlier in the session.

The trader did not see any activity in Wal-Mart's big new two-part mega-deal, saying it had not yet been freed.

He also did not see any aftermarket action in Metropolitan Edison's new 7.7% notes due 2019, which had priced at 550.2 bps over; he theorized that the utility's $300 million issue "had probably been bought up and put away."

Campbell's, Bottling Group trade tighter

Among Wednesday's issues, Campbell Soup's new 4.50% notes due 2019 continued to tighten, with a trader calling the bonds 217 bps bid, 212 bps offered, in from the 228 bps bid, 225 bps offered level at which they had initially traded Wednesday, and well in from the 237.5 bps level at which the $300 million of bonds had priced.

Bottling Group's $750 million of 5.125% notes due 2019, likewise improved to 280 bps bid, 273 bps offered; the PepsiCo unit's deal had priced at 300 bps over, and then tightened a little later that session to 293 bps bid, 288 bps offered.

CSX, Donnelley deals struggle

But two other Wednesday deals not only failed to move up in Thursday trading - they were actually seen in retreat.

CSX's $500 million of new 7.375% notes due 2019, which had priced at 525 bps over, widened out to 541 bps bid, 535 bps offered in Thursday's dealings.

And a trader said that the new R.R. Donnelley 11.25% notes due 2019 were "a real pig." He saw the $400 million of bonds - quoted on a dollar-price basis rather than on spread - at 96 bid, 99 offered, well down from their pricing level at 99.92

Fed Ex adds to gains

Among issues which priced on Tuesday, a trader said the new FedEx Corp. bonds continued to trade at very tight levels versus where the Memphis-based package and freight delivery company's offering had priced.

Its $250 million of 7.375% notes due 2014, which had priced at 593.9 bps over, and which had then tightened Wednesday to 525 bps bid, 510 bps offered, came in further still on Thursday to 510 bps bid, 500 bps offered.

The other part of that $1 billion deal, the $750 million of 8% notes due 2019, which came at 570.6 bps over and then tightened Wednesday to 520 bps bid, improved further on Thursday to 514 bps bid, 510 bps offered.

McDonald's holds gains

McDonald's Corp.'s new bonds were seen continuing to trade tighter than their Tuesday pricing levels, holding onto most of the gains they achieved in secondary dealings later that session.

A trader saw the Oak Brook, Ill.-based fast food giant's $400 million of 5% notes due 2019 at 248 bps bid, 242 bps offered - that was a little wider than the 243 bps bid, 238 bps offered level at which they had traded Wednesday but remained well in from their 270 bps pricing level.

Its $350 million of 5.70% bonds due 2039, which also priced Tuesday at 270 bps over, were trading at 255 bps bid, 251 bps offered, a little tighter than Wednesday's 260 bps bid, 250 bps offered.

Amgen trades tighter

Amgen's $1 billion of 5.7% notes due 2019, which had priced at 345 bps on Tuesday were trading at 305 bps bid, 290 bps offered, a little tighter than Wednesday's 310 bps bid, 300 bps offered level.

The Thousand Oaks, Calif.-based biotechnology company's $1 billion of new 6.40% bonds due 2039 meantime hung in around 320 bps bid, 318 bps offered - unchanged to slightly wider than their Wednesday levels but still well in from 345 bps at pricing.

Financials come off their lows

Among the established financial paper - with shares of Citigroup and Bank of America trading down sharply Thursday on investor worries about the health of the sector - a trader said that Citi paper "widened out significantly over the last three or four days, even into this [Thursday] morning, but as the stock market rebounded, so did spreads. They came off their lows, so by the end of the day, the paper definitely did better, about 10 bps to 15 bps tighter than their day's lows.

He also saw B of A's bonds wider on the day but 5 bps to 10 bps off their lows.

Another market source saw B of A's most active issue, its 3.125% FDIC-backed notes due 2012, at 88 bps over. He saw Citi's 6.50% notes due 2013 at 695 bps over.

Bank CDS levels mixed

In the credit-default swaps market a trader saw the cost of insuring bank bonds against a possible event of default about 15 bps wider on the day on average - but he saw Citi's CDS level bouncing back from Wednesday's badly oversold levels of 350 bps bid, 370 bps offered; on Thursday, that debt protection had tightened about 50 bps.

He saw Bank of America's CDS levels 15 bps wider on the day at 195 bps bid, 205 bps offered.

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