Packaging Corp., Leucadia National price as shutdown continues; new issues trade better

By Cristal Cody and Aleesia Forni

Virginia Beach, Oct. 15 - Despite the ongoing turmoil in Washington, Packaging Corp. of American and Leucadia National Corp. were able to price new issues during the session.

"The tone is somewhat cautious, but positive," one market source said on Tuesday.

Packaging Corp. came to market with $700 million of 4.5% senior notes at 180 basis points over Treasuries.

There was also a new deal from Leucadia National, which sold an upsized issue of 5.5% senior notes.

The $750 million notes due 2023 were priced with a spread of 295 bps over Treasuries.

A market source said the deal was more than two times oversubscribed.

Leucadia sold the issue at the tight end of talk.

The strength of the primary market is expected to continue this week, with one banker saying he believes issuance could reach "up to $10 billion."

The Markit CDX North American Investment Grade series 21 index was little changed at a spread of 77 bps as the market headed into the third week of the partial government shutdown, according to market sources.

In the secondary market, Leucadia National's new 5.5% notes tightened about 7 bps in late afternoon trading, a source said.

Packaging Corp.'s 4.5% notes firmed about 3 bps, according to a trader.

Leucadia upsizes

Leucadia National priced an upsized $750 million issue of 5.5% senior notes (Ba2/BBB/BBB-) due 2023 with a spread of Treasuries plus 295 bps, according to an informed source and an FWP filing with the Securities and Exchange Commission.

The book size reached more than $2 billion.

The notes sold at the tight end of talk, which was set in the area of Treasuries plus 300 bps.

Pricing was at 98.641 to yield 5.68%.

Leucadia National's 5.5% notes tightened in secondary trading to 288 bps bid, 285 bps offered, according to a trader.

Jefferies & Co. was the bookrunner.

The company plans to use the net proceeds from the offering to repurchase its 8.125% senior notes due 2015 and for general corporate purposes.

Leucadia is based in New York and engages in beef processing, manufacturing, gaming entertainment, real estate activities and medical product development.

Packaging Corp. new issue

In other primary action, Packaging Corp. of America sold $700 million of 4.5% senior notes (Baa3/BBB/) on Tuesday with a spread of Treasuries plus 180 bps, according to an FWP filed with the SEC.

Pricing was at 99.735 to yield 4.533%.

In the secondary market, Packaging Corp.'s 4.5% notes traded better at 177 bps bid, 175 bps offered, a trader said.

BofA Merrill Lynch and Deutsche Bank Securities Inc. were the bookrunners.

Proceeds will be used to repay debt and partly fund the acquisition of Boise Inc.

The containerboard and corrugated products producer is based in Lake Forest, Ill.

Bank/brokerage CDS levels

Investment-grade bank and brokerage CDS levels ended Tuesday unchanged to lower, according to a market source.

Bank of America Corp.'s CDS costs were flat at 101 bps bid, 105 bps offered. Citigroup Inc.'s CDS costs firmed 2 bps to 92 bps bid, 96 bps offered. JPMorgan Chase & Co.'s CDS costs closed unchanged at 85 bps bid, 88 bps offered. Wells Fargo & Co.'s CDS costs tightened 1 bp to 58 bps bid, 61 bps offered.

Merrill Lynch's CDS costs were flat at 103 bps bid, 107 bps offered. Morgan Stanley's CDS costs tightened 1 bp to 129 bps bid, 134 bps offered. Goldman Sachs Group, Inc.'s CDS costs firmed 1 bp to 123 bps bid, 126 bps offered.

Paul Deckelman contributed to this review

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