BP Capital sells three-tranche deal as sales dry up; BP, NiSource, Coca-Cola trade up in secondary

By Andrea Heisinger and Paul Deckelman

New York, March 5 - A soft tone and depleted calendar meant a deal from BP Capital was about the only sale pricing in the high-grade market Thursday.

The remainder of the week should be quiet, sources said.

In the secondary sphere on Thursday, a market source said the widely followed CDX Series 11 North American high-grade index was wider, at a mid bid-asked spread level of 248 bps, versus 242 bps on Wednesday.

Advancing issues caught up with decliners, pulling almost exactly even with them, numbers-wise.

Overall market activity, reflected in dollar volumes, fell by nearly 14% from the levels seen on Wednesday.

Spreads in general were wider on Thursday as Treasury yields slid; for instance, the yield on the benchmark 10-year issue tightened by 17 bps to 2.81%.

BP Capital Markets' new bonds were seen to have tightened by about 5 bps to 10 bps from the spreads over comparable Treasuries at which the respective tranches priced.

Another gainer was NiSource Finance Corp.'s new deal.

And Coca-Cola Co.'s new bonds continued to bubble up.

BP sells three tranches

London-based gas and oil company BP Capital sold $3.25 billion of notes in three tranches Thursday afternoon.

The deal was structured similarly to the previous week's sale from Chevron Corp., a market source said.

That offering had three tranches with three-, five- and 10-year maturities, while BP's was in three-, six- and 10-year tranches. The identically-rated companies (Aa1/AA) saw similar spreads for their notes, he said.

All three Chevron bonds priced at 195 bps over Treasuries flat.

BP's $1.5 billion of 3.125% three-year notes priced at a spread of Treasuries plus 185 bps. This was at the tight end of talk of 185 to 190 bps, and below the Chevron notes.

The two remaining tranches priced wider than Chevron.

The $750 million of 3.875% six-year notes priced at a spread of Treasuries plus 210 bps, in line with guidance of the 210 bps area.

A $1 billion tranche of 4.75% 10-year notes sold at a spread of Treasuries plus 200 bps. This was also in line with price talk of the 200 bps area.

All three tranches are guaranteed by BP plc.

Barclays Capital Inc., BNP Paribas Securities, Credit Suisse Securities and Goldman Sachs & Co. were bookrunners.

Calendar clears

A high-grade calendar that was well-stocked at the beginning of the week has been mostly depleted, sources said Thursday.

The start of the week saw many new deals, with issuance slowing significantly Wednesday for unknown reasons.

"The tone was a little soft today," a syndicate source said of Thursday's market. "Today we kind of had a reason, though."

Continuing negative news on General Electric Capital Corp. and Citigroup Inc. dragged down the tone somewhat, the source said.

"Tomorrow should be quiet," another syndicate source said. "I think we're about done for the week. I was kind of surprised it wasn't busier today."

BP bonds firm after pricing

When the new BP Capital Markets deal was freed for secondary dealings, traders saw the London-based international oil major's three tranches each trading higher.

The best performer of the lot was its 4.75% notes due 2019. The company had priced $1 billion of the notes earlier in the session at 200 bps over Treasuries. They quickly came in by 10 bps to 190 bps bid.

The company's 3.125% notes due 2012 were seen having improved to 178 bps bid, 175 bps offered from the 185 bps over level where the $1.5 billion of bonds had priced.

And its $750 million of 3.875% notes due 2015 firmed a little to 205 bps bid, from the 210 bps at which they had priced.

New NiSource moves up

A trader saw NiSource Finance Corp.'s 10.75% notes due 2016 trading at 100.5 bid, 101.25 offered. That was well up from the 98.795 level at which financial arm of the Merrillville, Ind.-based energy holding company priced its upsized $600 million deal on Wednesday.

Appalachian Power deal holds near issue

Another Wednesday offering, Appalachian Power Co.'s 7.95% notes due 2020, was quoted offered at 490 bps over, with no bids seen. The Columbus, Ohio-based energy company's $350 million of bonds had priced at 500 bps over.

Coke continues to climb

Coca-Cola Co.'s new two-part offering was continuing the firming trend seen during Wednesday's session.

A market source quoted the Atlanta-based soft-drink industry leader's 3.625% notes due 2014 as bid at 159 bps over Treasuries, well in from the 173 bps level at which the bonds had been seen on Wednesday. Coke priced $900 million of the notes at 185 bps this past Monday.

The other leg of that deal - the company's $1.35 billion of 4.875% notes due 2019 - were quoted trading at 188 bps bid, versus the 196 bps bid, 192 bps offered level seen on Wednesday, and the 205 bps at which they priced.

GE Capital remains busy

There once again was active trading in the bonds of General Electric Capital Corp., amid market speculation that the financial arm of Fairfield, Conn.-based industrial conglomerate General Electric Co. could lose its prized AAA credit rating.

Those bonds had been for the most part badly beaten down on Wednesday, but a trader Thursday said that GECC "didn't fall out of bed anymore." He saw the bonds instead unchanged to a little bit weaker."

But while some GECC issues were in fact not much moved, like the 3.125% notes coming due on April 1, which was seen just 3 bps wider on the day at 292 bps, other credits in the capital structure did widen out again substantially more than that. The 5.875% notes due 2012 were seen out 108 bps on the session, gapping out to 868 bps over. Volume on the issue was a heavy nearly $70 million.

Its 5.625% notes due 2018 widened out by 71 bps to 678 bps over, on volume of more than $30 million.

Financial CDS measures continue to widen out

In the credit-default swaps market, GE Capital's debt-protection costs rose to 17.4% upfront, plus the customary $500,000 annually, from Wednesday's close at 15.1%.

A trader meantime said the cost of insuring holders of big-bank paper against a possible default was "all over the place," with Citigroup Inc.'s CDS out by 60 bps, Bank of America Corp. 28 bps wider, JP Morgan Chase & Co. out by 30 bps, and Wells Fargo & Co. out as much as 20 bps.

He meanwhile saw debt-protection costs for former brokers who have since converted to commercial banks or have been bought by same 25 bps to 40 bps wider.

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