Wells Fargo, Lloyds TSB Bank, John Deere Capital, Idaho Power sell bonds; spreads tighter; Pfizer in demand

By Andrea Heisinger and Paul Deckelman

New York, March 25 - Issues backed by the Federal Deposit Insurance Corp. and other governments had a monopoly on the primary market Wednesday, with Wells Fargo & Co. and Lloyds TSB Bank plc each pricing deals. Smaller offerings from John Deere Capital Corp. and Idaho Power Co. also were sold.

JPMorgan Chase & Co. announced it is planning a sale of fixed- and floating-rate FDIC-backed notes, while U.S. Bancorp gave terms for a reopening of notes priced under the FDIC guarantee.

In the secondary sphere on Wednesday, a market source said the CDX Series 12 North American high-grade index was tighter on the day at a mid bid-asked spread level of 182 bps, versus 185 bps on Tuesday.

Advancing issues fell behind decliners, by a not-quite eight-to-seven ratio.

Overall market activity, reflected in dollar volumes, was up about 2% from the levels seen on Tuesday.

Spreads in general were seen continuing to tighten, in line with higher Treasury yields; for instance, the yield on the benchmark 10-year issue rose by 9 bps to 2.79%.

The big new deal of the day, other than government-backed issues for Wells Fargo and Lloyds, the John Deere three-year note, came too late in the session for any meaningful trading.

The Verizon Communications Inc. bonds that priced on Tuesday were gyrating around, first widening out and the tightening back in.

And last week's Pfizer Inc. multi-tranche offering continued to draw investor interest.

Several recently priced energy issues were seen having tightened up as well.

Lloyds TSB sells guaranteed bonds

London-based bank Lloyds TSB Bank sold $5 billion in bonds backed by the U.K. government Wednesday.

The deal was split evenly between fixed- and floating-rate tranches.

The $1.25 billion of two-year floaters priced at par to yield three-month Libor plus 85 bps.

A $1.25 billion tranche of three-year floaters priced at par to yield three-month Libor plus 100 bps.

The $1.5 billion of 2.3% two-year notes priced at 99.926 to yield 2.338%.

A final tranche of $1 billion in 2.8% three-year notes priced at 99.94 to yield 2.821%.

Treasury spreads were not available at press time.

The notes were sold via Rule 144A

Banc of America Securities LLC, Citigroup Global Markets Inc., Goldman Sachs & Co. and Lloyds Securities were bookrunners.

Wells Fargo prices FDIC notes

San Francisco-based financial services company Wells Fargo & Co. priced an upsized $3.5 billion of notes backed by the FDIC late Wednesday. The size was increased from $3 billion, with $250 million added to each tranche.

The lateness of the pricing left many syndicate desks mopping up, with one source saying "we're so jammed right now. It's been a crazy day."

The $1.75 billion of three-year floating-rate notes priced at par to yield three-month Libor plus 22 bps. A second tranche was $1.75 billion of 2.125% three-year notes priced at a spread of Treasuries plus 80.7 bps.

Goldman Sachs & Co., J.P. Morgan Securities, Morgan Stanley & Co. and Wachovia Capital Markets ran the books.

The deal came on the same day the company's senior debt credit rating was downgraded by Moody's to A1 from Aa3.

Bank of America Corp. also saw its ratings cut a notch by Moody's, to A2 from A1.

Both cuts were because of fear that the banks will need further government bailouts.

John Deere unit prices bonds

John Deere Capital priced $750 million of 5.25% notes due 2012 at Treasuries plus 400 bps.

This was in line with price talk of the 400 bps area, a source said. Earlier in the day talk was in the low 300 bps, they said.

Barclays Capital, Citigroup Global Markets and Deutsche Bank Securities ran the books for the Reno, Nev.-based financing arm of Deere & Co.

Idaho Power sells 10-year

Boise, Ida.-based Idaho Power priced $100 million 6.15% 10-year medium-term notes at Treasuries plus 340 bps.

Banc of America Securities, J.P. Morgan Securities and Wachovia Capital Markets were bookrunners.

The electric company is a subsidiary of Idacorp.

U.S. Bancorp reopens notes

U.S. Bancorp announced in a 424B5 Securities and Exchange Commission filing that it had reopened an issue of 2.25% three-year FDIC-backed senior notes to add $345 million on Tuesday.

The notes priced at 100.612.

Total issuance is $1.095 billion including $750 million issued March 13.

Barclays Capital ran the books for the Minneapolis-based bank.

JPMorgan announces FDIC deal

JPMorgan Chase announced it will price an FDIC-backed deal with a mix of fixed- and floating-rate notes, according to a 424B2 SEC filing.

The New York City-based financial services company is using proceeds for various things including repayment of debt, investments in or extensions of credit to subsidiaries, financing of possible acquisitions, business expansion or redemption of securities.

J.P. Morgan Securities is running the deal.

MetLife sells FDIC notes

A syndicate source said Wednesday that MetLife Inc. had priced an issue of FDIC-backed senior unsecured notes announced Monday in a Form 8-K SEC filing.

The deal totaled "$397 million and some change," he said. He could not disclose any details because the issue priced via Rule 3(a)(2), the source said.

According to the 8-K filing, the deal was started on March 23 so it was completed before an April 1 fee increase to the FDIC Temporary Liquidity Guarantee Program.

Proceeds are being used for general corporate purposes by the insurance company based in New York City.

New wave of FDIC deals

After a short drought of FDIC-backed deals, when non-financial names coming out of earnings blackout overran the primary with new deals, the government-guaranteed sales are again showing a presence in the market.

A syndicate source said he wasn't exactly sure why the new clump of issues was happening.

"I think it's been the trend the past few months," he said. "They kind of come and go, but there's no specific reason. I think they just issue when they need to."

Fear over the health of banking names has waned in recent weeks as many of the biggest have said they have turned a profit so far in 2009 and expect to for the remainder of the year.

"I think it's a good way to issue," a source said. "Obviously it's better than doing it without the FDIC [guarantee]."

The program was extended past its initial June date, and issuers are expected to keep pricing offerings as long as they can.

"It's a good deal," a source said. "Why not?"

Verizon very volatile

A trader saw Verizon's new bonds gyrating around all over the lot before finally ending not too far from where they had begun.

He said the New York-based telecommunication giant's $1.75 billion of 6.35% notes due 2019 -- which had priced on Tuesday at a spread over comparable Treasuries of 387.5 basis points, and which then straddled that mark in initial aftermarket activity - opened at 405 bps bid, 400 bps offered. However, by day's end, they had come back in to finish at 385 bps bid, 380 bps offered.

The same pattern held for the other half of that $2.75 billion two-part deal. The company's 7.35% bonds due 2039 opened at 405 bps bid, 395 bps offered, out from where they had traded on Tuesday, but then tightened later to 390 bps bid, 387 bps offered. The company had priced that $1 billion of notes Tuesday at 387.5 bps over, and they had initially traded at offered levels of 383 bps, with no bids seen at first.

New Staples stays strong

Another new deal from Tuesday was Framingham, Mass.-based office products retailer Staples Inc.'s $500 million of 7¾% notes due 2011. Those bonds - which had priced at a 683.4 bps spread, but which were being quoted around at a dollar-value price by market participants - had priced at par, and then had jumped as high as 101.625 bid, 101.875 offered in initial aftermarket dealings.

On Wednesday, they were being quoted having firmed a little more, to 101.875 bid, 102.25 offered.

Recent Pfizers still active

Looking back to last week's biggest deal, New York-based drugmaker Pfizer Inc.'s multi-tranche mega-deal continued to trade actively in Wednesday's secondary.

A market source saw its 4.45% notes due 2012 having tightened by 9 bps on the day to the 229 bps level, and saw busy dealings of over $25 million as of mid-afternoon. The bonds were well in from the 305 bps over level at which the company had priced the $3.5 billion issue last Tuesday, as part of its near record-setting $13.5 billion, five-part bond sale.

The source also saw Pfizer's 5.35% notes due 2015 doing even better, having firmed by 19 bps on the session to 250 bps over versus 269 bps on Tuesday, 273 bps on Monday, and well in from the 340 bps over level at which the company priced the $3 billion of bonds as part of that five-part mega-deal. Almost $25 million had traded by mid-afternoon.

Two other Pfizer tranches were seen among the more busily traded bonds, although less so than the '12s and the '15s. Pfizer's $1.25 billion of floating- rate notes due 2011 were quoted at a spread of 131 bps over. Meanwhile, its $2.5 billion of 7.20% bonds due 2039 were seen at a 325 bps spread on Wednesday, again in solidly from the 345 bps over level at which they had priced.

Barrick Gold loses a little luster

Among other recently priced issues, Barrick Gold Corp.'s 6.95% notes due 2019, which had previously been tightening smartly from its pricing level, widened out a little on Wednesday, with a market source quoting the bonds at 433 bps bid, versus 423 bps on Tuesday.

However, it remained in from the 439 bps level seen on Monday when it was one of the most active issues of the day, with volume of over $75 million. Volume declined to around $50 million on Tuesday and around half that on Wednesday.

The Toronto-based precious metals miner priced $750 million of the bonds at 462.5 bps over last Thursday.

Billiton tightens up

BHP Billiton Finance Ltd.'s 6.50% notes due 2019 were trading around 350 bps bid, about 10 bps tighter than their levels on Monday and Tuesday, and some 50 bps tighter than the 400 bps over level at which the Australian natural resources company priced the $1.75 billion of the bonds last Wednesday, as part of its $3.25 billion two-part bond offering. Over $40 million changed hands on Wednesday, making it one of the top movers of the day.

Chevron trading tighter

Another energy name, Chevron Corp.'s 4.95% notes due 2019, were being quoted at 132 bps bid on Wednesday, well in from the 195 bps over level at which the Houston-based energy major priced its $1.5 billion of bonds, as part of a $5 billion, three-part deal that hit the market at the end of February. Over $30 million of the '19s had changed hands by mid-day on Wednesday, landing it on the most-actives list.

Noble, Anadarko tighten up

Further tightening was seen among recent energy issues from Noble Energy Inc. and Anadarko Petroleum Corp. A participant saw Houston-based Noble's 8¼% notes due 2019 firm "solidly" to around the 520 bps over mark; that $1 billion issue had priced at 550 bps over on Feb. 24.

The Woodlands, Tex.-based Anadarko 's $600 million of 8.70% notes due 2019 meantime came in to about 600 bps over - in substantially from prior level, but still wide of the 587.5 bps over level at which the company priced both tranches of its $1.1 billion offering on March 2.

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