B of A, Washington Post, Delhaize, Entergy Texas, Pemex, Citi sell bonds; spreads wider; AmEx, du Pont steady

By Andrea Heisinger and Paul Deckelman

New York, Jan. 27 - Investment-grade bond issues again crowded into the market Tuesday, with Bank of America Corp., Washington Post Co., Delhaize Group SA/NV, Entergy Texas, Inc., Pemex and Citigroup Inc. either pricing new deals or adding to old ones.

Demand remains strong for high-grade paper among investors, a syndicate source said.

In the secondary sphere on Tuesday, a market source said the widely followed CDX Series 11 North American high-grade index was tighter by 9 basis points on the day to a mid bid-asked spread level of 199 bps from 208 bps on Monday.

Advancing issues overtook decliners, jumping out to a better than three-to-two bulge. Overall market activity, reflected in dollar volumes jumped about 39% from the levels seen on Monday.

Spreads in general were seen wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year issue was 11 bps tighter at 2.53%

The new Entergy Texas and Washington Post bonds were seen trading around their respective issue prices.

Earnings seemed to have little impact on the bonds of American Express Co. or E.I. du Pont de Nemours & Co.

B of A prices FDIC notes

Bank of America priced $8 billion of FDIC-backed notes in two tranches late Tuesday, market sources said.

The notes were a mix of fixed- and floating-rate.

Attempts to get terms from the bookrunner were unsuccessful at press time.

The $6 billion of fixed-rate notes due 2012 priced at a spread of Treasuries plus 181 bps, while a $2 billion tranche of floaters due 2012 priced at par to yield three-month Libor plus 30 bps.

Washington Post prices $400 million

Washington Post priced $400 million of 7.25% 10-year notes at 99.614 to yield 7.305% with a spread of Treasuries plus 475 bps.

The issue was announced early in the day, but did not launch or price until late.

The proceeds are to be used for repayment of existing debt.

"That was the reason they're issuing," a source close to the deal said. "I think that [the outstanding bonds] was the last time they issued."

Citigroup and J.P. Morgan Securities Inc. were bookrunners.

The deal came in at the tight end of price talk of 475 to 487.5 bps, the source said.

"We directed them to the low end based on reverse inquiries," he said.

It was "pretty oversubscribed" with books totaling $1.25 billion.

"They just needed to repay some debt, and it went pretty well," the source said.

Citi adds to FDIC issue

Citigroup added to a tranche of notes from Friday's $12 billion issue of FDIC-backed notes in four tranches.

In a Securities and Exchange Commission filing Tuesday, the bank said it added a second $500 million tranche to its $7.5 billion tranche of 2.125% notes due 2012.

The added notes priced Tuesday at 99.56 to yield 2.2567% with a spread of Treasuries plus 104.9 bps.

This brings the total for the notes to $8 billion, including the $7.5 billion priced Friday.

Citigroup Global Markets Inc. ran the books.

Entergy unit sells bonds

Entergy Texas priced $500 million 7.125% 10-year first mortgage bonds at 99.254 to yield 7.231% with a spread of Treasuries plus 470 bps.

BNP Paribas Securities, Credit Suisse Securities and Morgan Stanley & Co. Inc. were bookrunners.

Pemex sells $2 billion

Mexican petroleum company Pemex priced $2 billion 8% 10-year senior unsecured notes Tuesday at 98.313 to yield 8.25%.

They priced under Rule 144A/Regulation S.

Bookrunners were Calyon Securities, Citigroup and HSBC Securities.

Delhaize prices small deal

Belgian food retailer Delhaize Group priced $300 million of 5.875% five-year senior notes at 99.667 to yield 5.953% with a spread of Treasuries plus 437.5 bps.

The deal was reportedly to be upsized, a trader said, although it priced at the amount it was announced at.

Proceeds are to be used for a variety of things including debt and financing capital investments and acquisitions.

Banc of America Securities LLC and J.P. Morgan Securities ran the books.

Deals show demand

After a dull start to the week where virtually no bonds priced, Tuesday upped the ante with several new deals.

The pace is likely to continue - at least for the next two days, a source said.

"I would think we'll be fairly busy," he said. "From the reverse inquiries we've seen here and away today, I think there's a lot of interest. We saw a lot [of interest] in the single-A issuer today."

He was referring to the Washington Post issue, which was rated A1/A+.

Most of the day's other issuers were BBB rated with the exception of the FDIC-backed deal from Bank of America.

Despite murky market conditions that began the week, and with several large companies announcing thousands of layoffs, there is still much investor interest in high-grade bonds, a source said.

"I think we're seeing a lot of demand in IG paper," he said. "[Issuers] are pretty varied, but we're still seeing strong demand."

He attributed the slow start to the week to a mix of nasty headlines about job cuts, and simply the fact that it was Monday.

"We're back to the old schedule," he said, referring to a slow start and end to the week.

New deals trade around issue spread

A trader said that he saw market levels generally about 5 to 10 bps tighter.

He saw the new Washington Post 7.25% notes due 2019 trading around their issue spread of 475 bps over comparable Treasuries, and saw the new Entergy Texas 7.125% first mortgage bonds due 2019 trading around their issue spread at 470 bps.

At another desk, a trader saw those Entergy Texas bonds offered at 460 bps, but did not see any bids.

No aftermarket activity was seen in the new Delhaize Group 5.875% notes due 2014, which priced at 437.5 bps.

The trader also said that "all recent issues were well bid for."

Recent bonds hang in

A market source saw Staples Inc.'s 9.75% notes due 2014 trading around 667 bps over, well in from the 828.9 bps level at which the Framingham, Mass.-based office-supply retailer priced its $1.5 billion of bonds on Jan. 12.

Lubrizol Corp.'s new 8.875% notes due 2019 were seen at 573 bps over, well in from the 640 bps spread at which the Cleveland-based chemical company priced its $500 million of new bonds last Thursday.

Among recently priced FDIC-backed issues for financial firms, a market source saw Goldman Sachs Group Inc.'s new 1.625% notes due 2011 traded at 71 bps over, versus the 95.1 bps spread at which the New York-based investment bank-turned commercial bank priced its $3.5 billion of bonds on Jan. 13.

Citigroup's 2.125% notes due 2012 tightened to 85 bid, more than 20 bps tighter than the 105.75 bps pricing spread at which the New York-based banking giant priced its original $7.5 billion of notes last Friday.

B of A mixed on new bond issue

A trader who watches financials said that Bank of America's 2018 bonds traded up at 386 bps, which he said was "very close to the offer side," apparently unfazed by the big new mega-deal the Charlotte, N.C.-based banking giant brought to market. He opined that "maybe the fact that they could get it done helped."

However, another market source saw B of A's 5.42% notes due 2017 having widened by some 30 bps on the session, to 585 bps over.

American Express seen little changed on earnings

The first trader also said that American Express' bonds "did not really" go anywhere, despite the big financial services company's quarterly earnings.

"They're still hanging around, generically, in the high 400s, depending, and then low 400s on some of the longer-term debt."

He saw the company's 10-year bonds trading close to the 400 bps mark, while the 30-year paper "is trading right at, or through 400."

After the market closed Monday, American Express said it earned $238 million, or 21 cents per share, excluding special one-time costs; that was a cent off analysts' consensus expectations of 22 cents per share earnings.

Despite what Wall Street termed a disappointing performance, "the numbers didn't seem to have much effect on them at all."

Du Pont firmer despite numbers

Chemical giant EI du Pont's fourth-quarter loss and reduced 2009 guidance did not have any negative impact on its bonds, a trader said; he saw its 5% notes due 2013 at 245 bps bid, 240 bps offered, 5 to 10 bps tighter than Monday's levels.

Overall, one trader said, "generically, the market had a mixed tone, with some things doing a little better, and some a little weaker. But there was no definitive move, one way or the other."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.