Cox Communications, BMC Software, Rentenbank price; issuance, supply dwindle at end of record month

By Andrea Heisinger and Paul Deckelman

Omaha, May 29 - Supply of investment-grade new issuers is beginning to slacken, as evidenced by the relatively small amount of new deals Thursday.

Those that did issue, like Cox Communications, BMC Software Inc., El Paso Electric Co., Landwirtschaftliche Rentenbank and Universal Health Services, Inc., were primarily for small amounts.

The smaller number of issuers recently is not an indication of market conditions, a source said.

"A lot of stuff has already come out, if you look at the last two months," he said. "Deals seem to be performing well. There just aren't a lot of names left out there to issue right now."

In the investment-grade secondary market Thursday, advancing issues trailed decliners by a better-than four-to-three margin, while overall market activity, reflected in dollar volumes, fell about 5% from Wednesday's pace.

Spreads in general narrowed as Treasury yields continued to rise, with the yield on the benchmark 10-year note, for instance, widening by 8 basis points to 4.08%.

A trader said that trading in the newly priced issues seemed to be the main focus of the secondary market in the wake of the plethora of new deals which have priced over the past several sessions. He saw names such as International Paper Corp. and Cox Communications having come in from the spreads at which they had priced.

Cox matches talk

The issue from Cox was $1 billion in two tranches and priced under Rule 144A.

The company priced $750 million 6.25% 10-year notes at 99.605 to yield 6.304% with a spread of Treasuries plus 220 bps.

These notes were trading behind the issue after pricing, a source close to the deal said.

It went well, coming in line with price talk of 220 bps area.

"It was almost exactly what we were expecting," he said. "It was about two-and-a-half times oversubscribed and was a pretty straightforward deal."

The second tranche was $250 million of 6.95% 30-year notes at 99.751 to yield 6.970% with a spread of Treasuries plus 220 bps.

Bookrunners for the 10-year notes were Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and Wachovia Capital Markets.

Those for the 30-year notes were Barclays Capital Inc., Deutsche Bank Securities Inc., J.P. Morgan and Lehman Brothers Inc.

Rentenbank, BMC price

Germany's Rentenbank priced $1.25 billion of 4.125% five-year senior notes at 99.775 with a spread of Treasuries plus 70.7 bps.

Goldman Sachs & Co., RBC Capital Markets and RBS Greenwich Capital ran the books.

BMC Software priced $300 million of 7.25% 10-year notes at 99.406 to yield 7.335% with a spread of Treasuries plus 325 bps.

This was on the tight end of price talk of 337.5 bps area, a source close to the issue said.

Banc of America Securities LLC and Credit Suisse Securities were bookrunners.

Universal Health reopens

Hospital management company Universal Health Services reopened its 7.125% 10-year notes to add $150 million.

The reopened notes priced at 100.753 to yield 7% with a spread of Treasuries plus 289 bps.

Total issuance is now $400 million, including $250 million issued June 30, 2006.

Banc of America ran the books.

Another of the day's smaller issues came from El Paso Electric. It priced $150 million 7.5% 30-year notes at 99.146 to yield 7.574% with a spread of Treasuries plus 280 bps.

Credit Suisse was bookrunner.

A few deals expected Friday

Friday should follow the trend of recent weeks with moderate issuance at the end of the week.

There are one or two issues that could come out, a source said.

"It should be very similar to today," he said. "There aren't a lot of things expected, but we've seen a couple of big issues on Fridays lately."

With the end of the week also comes the last day of deals for the month. It is already a record May with about $140 billion in new issues, a market source said.

Year-to-date issuance is also ahead of last year during the same period.

New Cox bonds marginally firmer

A trader saw the new Cox Communications bonds that came during Thursday's session as having narrowed at least a little bit from the spreads at which they had priced earlier in the day. He quoted the company's 6.25% notes due 2018 as having narrowed slightly to 218 bps bid, 213 bps offered, versus the 220 bps at which the bonds had priced.

He also saw Cox's new 6.95% bonds due 2038 having improved to 215 bps bid, 210 bps offered, also compared with a 220 bps spread at pricing.

International Paper improves

International Paper's 7.40% notes due 2014, $1 billion of which priced at 410 bps over Treasuries on Wednesday, were seen having tightened Thursday to 397 bps bid, 393 bps offered. The company's $1.7 billion of 7.95% notes due 2018, which came at 395 bps over on Wednesday, were trading Thursday at 386 bps bid, 382 bps offered.

Its $300 million of new 8.70% bonds due 2038, which had priced at 407.5 bps over on Wednesday, came in to 398 bps bid, 394 bps offered on Thursday.

New Nucors narrow, Cardinal comes in

Nucor Corp.'s $300 million of reopened 6.40% 30-year bonds, which priced Wednesday at 190 bps over, had tightened to 185 bps over on Thursday. A trader said he had not seen the $250 million of 5% notes due 2013, which priced at 180 bps over, or of the companion $500 million of 5.85% notes due 2018, which also priced at 190 bps off Treasuries.

The trader said that Cardinal Health Inc.'s new 5.50% notes due 2013 were trading at 220 bps bid, 215 bps offered. The Dublin, Ohio-based healthcare products provider priced $300 million of the notes on Wednesday at 225 bps over Treasuries.

Kraft, Glaxo still well in

Among recently priced issues, Kraft Foods Inc.'s 6.125% notes due 2018 were being quoted at 196 bps over Treasuries; the packaged foods giant priced $1.25 billion of those bonds, along with $750 million of 6.875% bonds due 2039 at 240 bps over on May 19.

And GlaxoSmithKline Capital Inc.'s 6.375% bonds due 2038 were trading at 151 bps over, versus the 173 bps spread at which the drugmaker priced $2.75 billion of those bonds, along with companion issues of $2.5 billion of 4.85% notes due 2013 and $2.75 billion of 5.65% notes due 2018, on May 6.

A trader said that established bonds' spreads were "pretty much unchanged on the day, pretty much across the board. Everyone is focused on the new-issue calendar. They're not even looking at secondary right now."

However, here and there, established issues were moving around.

Macy's Retail Holdings' 5.90% notes due 2016 were seen having tightened about 25 bps to the 360 bps level.

On the downside, Anheuser-Busch - roiled by recent market speculation that the top U.S. brewer might be bought out by larger European rival InBev, with a resulting increase in leverage - was seen on the downside, its 4.50% notes due 2018 widening out more than 10 bps to about the 200 bps level.

CDS spreads tighten up

A trader said that debt-protection costs for big banks and major brokerages tightened on Thursday, reflecting investors' more hopeful view about those sectors.

He saw the banks' credit-default swaps tightening anywhere from 1 bp to 8 bps, while the brokerage houses were anywhere from 1 bp to 17 bps narrower on the session. He saw Lehman Brothers Holdings' CDS costs - which had ballooned out on speculation of continued problems at Lehman connected with the credit crunch - as having firmed by 17 bps Thursday, down to 220 bps bid, 235 bps offered.

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