Wells Fargo prices floaters, primary backlog builds; Bank of NY tighten sharply, Heinz, Hormel up on earnings

By Andrea Heisinger

New York, Aug. 21 - Wells Fargo & Co. provided a small issue Thursday for the investment-grade total for the week.

This will likely be the last deal until next week, a source said.

In the investment-grade secondary market, the recent issue from Bank of New York Mellon Corp. was seen tightening considerably, by double-digit basis points, from its pricing level Wednesday.

The financial company saw one of the more impressive moves for the day, a source said.

Wells Fargo prices floaters

Wells Fargo was one of a small number of issuers in the high-grade market Thursday, pricing $300 million of three-year floating-rate notes.

The medium-term notes priced at par to yield three-month Libor plus 65 basis points.

It was a good trade with a good level, a source close to the issue said.

Goldman Sachs & Co. was agent.

Washington Gas Light issues floaters

Washington Gas Light Co. priced a $50 million issue of two-year floating-rate notes Thursday at par to yield three-month Libor plus 80 bps.

Citigroup Global Markets Inc. and Wachovia Capital Markets ran the books.

New issue backlog builds

As many take the next week to use up vacation time, a backlog will be building in investment-grade new issues, sources said Thursday.

"We'll have a significant portion of the Street missing because everyone's taking vacation," a source said. "It should be quiet."

Another primary source said "basically what I'm hearing is there will be a backlog until September."

Sources said they weren't aware of anyone looking at the market until after Labor Day, but it doesn't mean there won't be a handful of smaller issues.

"I don't think it's the most responsible thing to advise anyone to come into the market right now," a source said.

Issuance is likely done for the week because of lack of supply and flat market conditions.

"I would be shocked if anyone priced anything tomorrow," the source said.

Heinz, Qantas earnings up

Food company H.J. Heinz Co. announced a 12% increase in first quarter earnings Thursday. The company had a net income of $229 million for the quarter, compared to $205.3 million for the previous year.

Heinz's notes due 2013 were seen at 208 bps over Treasuries in afternoon trading, and not moving significantly, a source said. They may have tightened 1 to 2 bps, he added.

The company credited record sales growth of organic products, dynamic growth in emerging markets, higher marketing investments and benefiting from its focus on products for a healthy lifestyle, according to a press release.

Australia's Qantas Airways Ltd. announced a record profit of $1.408 billion, before taxes, for the year ending June 30. This was a 46% increase from the previous year.

The airline's bonds weren't seen moving one way or the other Thursday, a trader said.

Qantas cited a strong revenue environment, and efforts to improve efficiency amid rising fuel costs.

"The strategies we have worked hard to implement over the past few years, including the successful two brand strategy, the segmentation of our business and the continued focus on costs through the Sustainable Future Program, have put us in a strong position to deal with the current challenges," Qantas chief executive officer Geoff Dixon said in a press release Thursday.

Hormel sales up, earnings down

Also announcing earnings was meat and convenience food purveyor Hormel Foods Corp., with fiscal third quarter earnings of $51.9 million, down 9% from the $57.4 million a year earlier. Sales increased during the quarter, earning $1.68 billion in contrast to $1.52 billion last year.

In a press release, chairman of the board, president and chief executive officer Jeffrey M. Ettinger said the company's earnings were hindered by higher feed and fuel costs in its Jennie-O Turkey Store segment. The refrigerated foods segment and lower investment income also dragged profitability down.

Hormel's 6.625% notes due 2011 were seen at 170 bps bid Wednesday, tightening about 20 bps since July, a source said.

Bank of NY Mellon notes tighten

A trader saw a sharp tightening of Wednesday's issue from Bank of New York Mellon Corp.

The 5.125% five-year notes were seen at 208 bps bid, 205 bps offered in afternoon trading, in 12 bps or more from pricing at 220 bps over Treasuries.

"They've tightened in quite a bit," the source said.

The notes were said to have carried about a 10 bps new issue premium.

Bank, broker CDS spreads widen

Bank CDS costs were seen 5 to 10 bps wider Thursday, a trader said.

Lehman Brothers CDS was seen about 20 bps wider at 375 bps bid, 395 bps offered.

This was after analysts, including Wall Street broker Sanford Bernstein, predicted about $3 billion in write downs for the investment bank in its third quarter earnings announcement due in September. This is a larger loss than expected.

Brokerage CDS spreads were seen 10 to 20 bps wider, the trader said.

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