Lincoln National, Georgia Power, Clorox, Florida Power sell deals; few issues expected Thursday

By Andrea Heisinger and Paul Deckelman

Omaha, Oct. 3 - The bulk of new issues are done for the week, sources said, and Lincoln National Corp., Georgia Power Co., Clorox Co. and Florida Power & Light Co. priced theirs Wednesday.

In the secondary market Wednesday, the recent firming trend continued, with advancing issues outpacing decliners by a ratio of roughly seven to five.

The new Lincoln National and the Schwab Capital Trust floating-rate trust preferred securities priced Tuesday were seen having tightened from the spreads at which they were issued.

The issue from Clorox was $750 million in two tranches of five- and 10-year notes.

The $350 million of 5.45% five-year notes have a price of 99.864 to yield 5.481%, at a spread of Treasuries plus 125 basis points.

The $400 million of 5.95% 10-year notes have a price of 99.648 to yield 5.997%, at a spread of Treasuries plus 145 bps.

Lincoln National priced $375 million of 6.3% 30-year senior notes at 99.479 to yield 6.339%, at a spread of Treasuries plus 153 bps.

Georgia Power's 2.25 million 6.5% non-cumulative perpetual preference shares priced at par of $100.

Florida Power & Light Co. priced $300 million in 5.55% 10-year first mortgage bonds at 99.972 to yield 5.553%, at a spread of Treasuries plus 100 bps.

New of one upcoming deal emerged during Wednesday's session. Delta Air Lines is marketing a $1.409 deal in three parts, market sources said.

Two tranches totaling $1.189 billion of enhanced equipment certificates are rated investment-grade, while a $220 million tranche is junk rated.

The Rule 144A issue will be run off the investment-grade desks of bookrunners Credit Suisse Securities LLC and Merrill, Lynch, Pierce, Fenner & Smith Inc.

New issue cost shrinks

New issue premiums continue to shrink, sources said, citing Tuesday's Target deal as an example.

"Target was exactly 10 bps new issue premium and instead of tightening during price talk, they were talking it wider and then tightening," a market source said.

The Lincoln National issue priced at a pretty tight curve, a source said, with five to 10 bps new issue premium. The issue from Florida Power also dipped below 10 bps on the issue premium, at 7 or 8 bps.

This is down from previous weeks where the new issue premium was sitting at 30 bps on most issues.

"I think there's increasing optimism," a source said of why the premiums have dropped. "People are anticipating another rate cut could happen from the Fed later this month."

Spreads remain stable after tightening over the last week, some as much as 10 bps, a source said.

New deals seen sparse Thursday, Friday

There will be a low volume of issues for the remainder of the week.

"There are probably three in the market for the rest of the week," a source said. "I think Friday's probably a non-day."

Another source predicted the stable market conditions could bring out one to two more issuers this week.

"We're not going to see anything substantial," he said. "There's still quite a bit of a backlog but people are going to hold off."

Lincoln tightens

A trader said that the new Lincoln National 6.30% senior notes due 2037 tightening to a spread of 151 bps bid, 148 bps offered over Treasuries, in slightly from the 153 bps at which the bonds had priced earlier in the session.

And he saw the new Schwab trust preferred securities, which had priced at 300 bps off Treasuries, as having firmed to 288 bps bid, 285 bps offered. Charles Schwab Corp. priced $300 million of the securities Tuesday.

Goldman narrower

He said that "not a lot" was going on among already established bonds - even among the recently priced issues, although he did see Goldman Sachs Group's 6¾% bonds due 2037 having narrowed to inside of 185 bps bid, 175 bps offered. The bonds priced at 190 bps off Treasuries on Sept. 26.

Elsewhere, a trader observed that credit default swaps on investment-grade brokerage names had come down, continuing a recent trend sparked by strong earnings reported by industry leader Goldman Sachs.

He saw Bear Stearns' CDS costs fall to 84/89 bps, versus recent levels around 90/95 bpd.

The cost of debt protection for Lehman Brothers bonds came in to 74/79 bps from around 80/85 bps, while Merrill Lynch stood at 55/60 offered, versus about 58/62 previously. Morgan Stanley's debt protection cost was 52/57 bps, a pickup of about 3 bps.

A market source said that financial names like Barclays Bank plc, Lehman, and General Electric Capital Corp. were among the more actively traded issues.

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