High volume continues: CSX, Pepsi unit, Campbell Soup, R.R. Donnelley, Morgan Stanley price

By Andrea Heisinger and Paul Deckelman

New York, Jan. 14 - It was another day that passed expectations in the investment-grade bond market, with sales from CSX Corp., Pepsi's Bottling Group LLC, Campbell Soup Co., R.R. Donnelley & Sons Co. and Morgan Stanley.

A market source said he and others on syndicate desks were expecting a sharper downturn in new issues than what turned out to be a busy Tuesday.

In the secondary sphere on Wednesday, a market source said the widely followed CDX Series 11 North American high-grade index widened 2 basis points on the day to a mid bid-asked spread level of 220 bps from 218 bps on Tuesday.

Advancing issues continued to lead decliners, by a better than eight-to-seven ratio. Overall market activity, reflected in dollar volumes, fell nearly 11% from Tuesday's pace.

Spreads in general were seen wider, in line with solidly lower Treasury yields; for instance, the yield on the benchmark 10-year note was 10 bps narrower at 2.19%.

Newly priced issues continued to dominate the secondary trading arena, traders said, with the new Campbell's Soup and Bottling Group deals seen firming a little from the spreads over comparable Treasuries at which those bonds were issued.

Among the bonds which priced on Tuesday, the McDonald's Corp. two-part deal continued to trade tighter than its pricing levels. FedEx Corp. and Amgen Inc. were also seen tighter.

Donnelley brings $400 million

Printing company R.R. Donnelley & Sons priced an upsized $400 million of 11.25% 10-year notes at 99.992 to yield 11.25%. The deal had no spread and priced at the coupon and yield, a source close to the deal said.

The original size was unofficially $300 million, he said.

Bookrunners were Banc of America Securities LLC, Citigroup Global Markets Inc. and J.P. Morgan Securities Inc.

The deal priced slightly above talk of 11% yield, the source said. It was mostly a normal sale, despite the high-yield-like pricing. There were "a couple of high-yield accounts," he said, but nothing out of the ordinary.

It was partially sold through reverse inquiry, he said.

CSX prices 10-year notes

Transportation company CSX priced $500 million 7.375% 10-year notes at 99.361 to yield 7.466% with a spread of Treasuries plus 525 bps.

It was one of the few deals to price Wednesday to do so at a spread, a source said.

Books were run by Credit Suisse Securities Inc., J.P. Morgan Securities and UBS Investment Bank.

Pepsi unit sells bonds

Pepsi's Bottling Group priced $750 million of 5.125% 10-year senior notes at 99.399 to yield 5.203% with a spread of Treasuries plus 300 bps.

Active bookrunners were Credit Suisse and Morgan Stanley & Co., with Banc of America Securities and Citigroup Global Markets as passives.

The notes were sold to repay an issue reaching maturity.

Campbell Soup offers $300 million

Convenience food company Campbell Soup priced $300 million 4.5% 10-year notes at 99.285 to yield 4.589% with a spread of Treasuries plus 237.5 bps.

A source said it was "straightforward."

Barclays Capital Inc., J.P. Morgan Securities and UBS Investment Bank were bookrunners.

Morgan Stanley sells FDIC notes

Morgan Stanley priced another issue of notes backed by the Federal Deposit Insurance Corp. Temporary Liquidity Guarantee Program Wednesday.

The $4.5 billion deal was upsized to add a floating-rate tranche. It was originally in two tranches totaling $4.25 billion.

The $3 billion of 1.95% fixed-rate notes due 2012 priced at 99.958 to yield 1.963% with a spread of Treasuries plus 97.6 bps.

A $1.25 billion tranche of floaters due 2012 priced at par to yield three-month Libor plus 35 bps.

A second floating-rate tranche was $250 million of notes due 2012 that priced at par to yield one-month Libor plus 47 bps.

Morgan Stanley ran the books for the deal.

Day brings more than bargained

A slowing of new issues following Tuesday's rush didn't quite happen as expected Wednesday.

A market source said there was "not much" happening in the market, but that syndicate desks were somewhat surprised to see the amount of issues that priced.

"There was a lot of stuff out there," he said. "We thought today would be quiet."

It could be that people are trying to get issues in before a long weekend and early market close Friday, he said.

It's more likely, however, that companies were simply following the lead of bond sales from Tuesday.

"You saw a single-A name like Campbell [Soup] that was probably following the lead of McDonald's [Corp.] that priced [Tuesday]," he said.

Campbell Soup is rated A2/A/A, while McDonald's is rated A3/A/A.

Large FDIC deals return

A large offering of FDIC-backed notes from Morgan Stanley priced Wednesday, making it the second of the week to carry the government guarantee.

A prediction of a rush of these issues in the first weeks of 2009 has not materialized, a source said.

"I think a lot of the banks that wanted to price already did," he said. "They might come back for seconds, but I don't think we're going to see a bunch of new people doing them."

Most of the large banks have already issued more than once, as well as doing reopenings.

Goldman Sachs Group Inc. was the first FDIC-guaranteed issuer of the week, pricing $3.5 billion Tuesday in a single tranche.

New Campbell's bonds are MMMM-MMMM - good

More than one trader saw Campbell Soup's new 4.50% notes due 2019 having tightened to 228 bps bid, 225 bps offered, versus the 237.5 bps level at which the $300 million of bonds had priced.

Bottling Group bonds get boost, slightly

Bottling Group's $750 million of 5.125% notes due 2019, which priced at 300 bps over, were seen by a trader at 293 bps bid, 288 bps offered. At another desk, a trader was quoting the bonds at 295 bid, 285 offered.

A trader said that the new CSX and R.R. Donnelly deals had not firmed for trading after pricing.

FedEx delivers for investors

Among issues which priced on Tuesday, a trader said the new FedEx bonds "tightened quite a bit" from their pricing levels, with the Memphis-based package and freight delivery company's $250 million of 7.375% notes due 2014 at 525 bps bid, 510 bps offered, well in from their 593.9 bps spread at pricing.

The other part of that $1 billion deal, the $750 million of 8% notes due 2019, which came at 570.6 bps over, were bid 50 bps tighter Wednesday at 520 bid, and none offered.

Another trader saw both tranches of the new bonds bid at 525 bps.

McDonald's holds gains

McDonald's new bonds were seen continuing to trade tighter than their Tuesday pricing levels, holding onto the gains they achieved in secondary dealings later that session.

A trader saw the Oak Brook, Ill.-based fast food giant's $400 million of 5% notes due 2019 at 243 bps bid, 238 bps offered, well in from their 270 bps pricing level, although a second trader saw those bonds offered at 245 bps but did not quote a bid.

Its $350 million of 5.70% bonds due 2039, which also priced Tuesday at 270 bps over, were trading at 260 bps bid, 250 bps offered.

Amgen trades tighter

Amgen's $1 billion of 5.7% notes due 2019, which had priced at 345 bps on Tuesday were trading as good as 310 bps bid, 300 bps offered, a trader said, while another pegged the new bonds at 306 bps bid, 296 bps offered.

The Thousand Oaks, Calif.-based biotechnology company's $1 billion of new 6.40% bonds due 2039 meantime had come in to 319 bps from 345 bps at pricing, with a second trader seeing them at 318 bps bid, 310 bps offered.

Bank, broker CDS levels keep widening

In the credit-default swaps market a trader saw the cost of insuring bank bonds against a possible event of default anywhere from 25 bps to 100 bps wider, with Citigroup's CDS level "obviously" the name which saw the greatest widening, in the wake of its agreement to sell a majority stake in its brokerage unit to Morgan Stanley, a development which some analysts see as a signal that other units may be sold and the industry's first "financial supermarket" to possibly be broken up; he saw the five-year contract out by 100 bps on the day at 350 bps bid, 370 bps offered.

Among the former investment banks, debt-protection costs were 5 bps to 20 bps wider, with Morgan Stanley out by 25 bps at 410 bps bid, 420 bps offered; Goldman Sachs was 10 bps wider at 300 bps bid, 310 bps offered, while Bank of America unit Merrill Lynch was out by 5 bps at 180 bps bid, 190 bps offered.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.