American General, John Deere price new issues; secondary lacks direction after Fed moves

By Andrea Heisinger and Paul Deckelman

Omaha, Dec. 12 - The trickle of new issues continued Wednesday following the Federal Reserve's rate cut with American General Finance, John Deere Capital Corp. and BP Capital Markets plc getting deals done.

A unit of American International Group Inc., American General priced an upsized $3 billion in 6.9% 10-year notes at Treasuries plus 290 basis points.

Price talk was in the 285 bps range, and the issue was upsized from $1.5 billion, a market source said. The coupon was talked at 7%.

A source estimated the company paid about a 55 bps new issue premium since its outstanding 10-year issue was quoted at about 230 bps.

The company is a mortgage lender, which contributed to the high premium, the source said.

"It has a lot of subprime exposure and that could account for it," he said.

Merrill Lynch, Pierce, Fenner & Smith Inc., Deutsche Bank Securities Inc. and RBS Greenwich Capital ran the books.

In the secondary market, news that the Federal Reserve would take additional steps to combat the credit crunch by boosting liquidity to banks produced what one trader called "no decisive trend," as market players sought to evaluate the central bank's move.

While some financial names like Washington Mutual and Morgan Stanley were seen having tightened, others, like Merrill Lynch and Lehman Brothers were seen having widened. Citigroup's bonds were seen having "hung in there" a trader said, little changed on the announcement of top personnel hires by the banking giant.

Deere brings $500 million

John Deere priced an upsized $500 million in 4.95% five-year medium-term notes at 99.899 to yield 4.973% at a spread of Treasuries plus 147 bps.

The issue was upsized from $300 million.

Bookrunners were Citigroup Global Markets Inc. and J.P. Morgan Securities Inc.

BP Capital added $500 million to its $1.5 billion issue of guaranteed extendible floating-rate notes from Tuesday.

The notes have the same terms, with a step up coupon and initial maturity in 2009, with final maturity in Dec. 2012.

Goldman Sachs & Co. and HSBC Securities were bookrunners.

MetLife Capital Trust IV completed a Rule 144A offering Wednesday, according to a Securities and Exchange Commission filing.

The company issued $700 million in 7.875% fixed to floating rate exchangeable surplus trust securities that are automatically exchangeable for fixed to floating rate junior subordinated debentures due 2067.

2007 not done yet

New issuance for the year has slowed but is not over, sources said.

"I don't think we're finished yet," a market source said.

"The equity market is up, and Treasuries are stable."

Unless one of those things changes there should continue to be a steady stream of issuers that need to get into the market.

Some sources said they were surprised there were not more new issues Wednesday following the Fed rate cut, but that other factors may have kept companies out of the market.

"Everyone's skittish after that 300 point sell off yesterday," a source said.

Trading weak

A trader said that trying to gauge the impact of the Fed announcement was "a tough read." He said that the market overall was "sloppy, along with Treasuries and equities. There was no decisive trend."

He noted that the new American General 6.90% notes due 2017 "put a little pressure on the insurance names," notably Prudential Financial's recent 6% notes due 2017. Those bonds, which priced at 207 bps over Treasuries on Nov. 28, had widened out to 220 bps bid, 210 bps offered on Wednesday.

The trader also said that Citi's bonds, like its 6 1/8% notes due 2017 "hung in "around the same levels they had occupied on Tuesday, at 170 bps bid, 160 bps offered, apparently not much moved on the news that Citi had appointed Vikram Pandit as its chief executive and Sir Win Bischoff as chairman, replacing the recently ousted Charles Prince. However, another market source said the bonds had firmed considerably to around the 170 bps level from prior levels in the 190s.

WaMu gains

The trader also said that Washington Mutual's bonds were "generically better" as the big thrift priced its convertible mega-deal, "but I'm not seeing a big follow through" after the steps WaMu announced to turn itself around, including writing down goodwill from its mortgage operation, slashing its dividend, cutting headcount and raising capital through the convertibles sale.

At another desk, however, WaMu's 5¼% notes due 2017 were seen having come in to around the 350 bps over level from around 375 bps previously.

Washington Mutual priced an upsized $3 billion in 7.75% series R non-cumulative perpetual convertible preferred stock with an approximately 18% conversion premium Wednesday before the market open.

The Seattle-based retail bank and lending institution intends to put $1 billion into its subsidiary Washington Mutual Bank for working capital and the rest of the proceeds will be held by the holding company for general corporate purposes.

The preferred stock offering was part of a major restructuring and cost-cutting plan Washington Mutual announced late Monday after the company announced around $1.6 billion in losses from the subprime mortgage crisis.

Other gainers included Morgan Stanley's 4¾% notes due 2014, in about 20 bps at 188 bps.

Among the names seen wider were Lehman's 6 7/8% long bonds, seen out around 15 bps to 245 bps, and Merrill's 6.40% notes due 2017 also about 15 bps wider, with a spread topping 200 bps.

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