GE Capital prices drawn out FDIC issue, overshadows deal from Ameren unit; Caterpillar strong again

By Andrea Heisinger and Paul Deckelman

New York, Dec. 4 - General Electric Capital Corp. was the latest company to take advantage of the Federal Deposit Insurance Corp. Temporary Liquidity Guarantee Program on Thursday, overshadowing the day's smaller issue from Central Illinois Light Co.

The GE Capital sale was the first that didn't come from a straight bank, a source close to the deal said, which made it different than the multiple others that came before.

He also said to expect more and from a wider variety of sources in the coming weeks.

In the investment-grade secondary market Thursday, advancing issues led decliners by a better than seven-to-six ratio. Overall market activity, reflected in dollar volumes, was up about16% from Wednesday's pace.

Spreads in general were seen wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year issue declined by 10 basis points to 2.58%.

Traders said that the new Caterpillar Inc. bonds continued to firm for a second straight session, and saw gains in other recently priced issues like Hewlett Packard Co. and Potomac Electric Power Co.

Goldman Sachs Group Inc.'s bonds meantime picked up an endorsement, with a noted analyst forecasting that their spreads are likely to tighten over the next few months, with market anticipation of a weak quarter already priced in.

GE Capital prices $6.5 billion

The issue started as one tranche of fixed-rate notes in its prospectus, with General Electric Capital opting to stretch it into four by the time it priced late Thursday.

A source close to the deal called it "long winded" for the two-day time frame it took to get the books together. Many of the other FDIC-backed issues have been done overnight, sufficient time for them to bring in the European and Asian markets.

The GECC issue ended up as a mix of fixed- and floating-rate notes.

The company priced $3.5 billion of three-year fixed-rate notes.

It also priced $1 billion of two-year floaters priced at par to yield three-month Libor plus 63 basis points.

The third tranche was $1 billion of three-year floating-rate notes priced at par to yield three-month Libor plus 93 bps.

The tranche that was added last, the source said, was $1 billion of floaters due in 2010 that priced at three-month Libor plus 40 bps.

The source said he could not give out full terms because the FWP filing was not completed.

There was never a set size for the deal, he said, with books being increased as orders came in.

"It was a long drawn-out process," he said. "This one was different. In the past, banks were issuers, and banks would do the full books [themselves]."

Many of the previous multi-billion-dollar deals were led by a single bookrunner that was also the issuer.

The process for this transaction was different, with Banc of America Securities LLC, Barclays Capital and Citigroup Global Markets jointly running the trade.

It was officially announced at the end of the day Tuesday, after the successful pricing of the Citigroup deal, a source said.

In the following two days, interest in the books would "pick up dramatically at the end of the day," he said.

This accounted for the gradual adding of tranches, he added.

Ameren unit sells bonds

Central Illinois Light, which is a subsidiary of Ameren, priced a split-rated offering of five-year senior secured notes.

The issue was $150 million priced at 734.9 bps. Full terms were not available at press time.

BNP Paribas Securities and Goldman Sachs & Co. ran the books.

Goldman, Citi, give FDIC deal terms

Both Goldman Sachs Group Inc. and Citigroup Inc. announced terms for additions to or further issuance under the FDIC-guaranteed notes program.

Goldman Sachs priced an additional $575 million of two-year floaters priced at par to yield three-month Libor plus 50 bps.

Goldman Sachs was bookrunner.

Citigroup added $250 million to its two-year floaters priced at par to yield three-month Libor plus 55 bps.

Total issuance for the notes is $1.25 billion including $1 billion priced Dec. 2.

Citigroup was bookrunner.

More FDIC deals expected

Rumors swirled Thursday about who would be the next to issue under the FDIC-backed program. One name mentioned was American Express, with a source saying he didn't know anything official, but heard they could be pricing a deal next week.

He said he didn't know whether or when Regions Bank would issue under the program.

"I think we're going to see some more of the big names do these small issues or add on," he said. "It will be interesting to see if more like GE come out."

John Deere Capital Corp. indicated that it would have the ability to issue FDIC-backed notes under the program in a filing with the Securities and Exchange Commission Thursday.

The source noted that there are more employment figures coming out Friday, but it likely wouldn't stop any companies from doing an issue.

"It's probably going to be depressing," he said. "I don't know how many people pay attention."

Caterpillar keeps tightening

In the secondary market, a trader saw Caterpillar's new three-part deal continuing to have firmed solidly from the levels at which the Peoria, Ill.-based heavy-equipment maker's bonds had priced on Tuesday.

He saw its $350 million of new 7% notes due 2013 trading at a spread versus comparable Treasuries of 450 bps bid, 440 bps offered, in markedly from 515 bps bid, 510 bps offered on Wednesday, and in still further versus the 535 bps spread at which the five-years had priced.

The company's $900 million of new 7.90% notes due 2018, which had priced at 525 bps over and then improved on Wednesday to 515 bps bid, 510 bps offered, tightened further Thursday to 502 bps bid, 495 bps offered.

He also saw Cat's $350 million of new bonds due 2038 - which had priced at 510 bps over and then had tightened Wednesday to 488 bps bid, 480 bps offered - narrow on Thursday to 468 bps bid, 464 bps offered.

"Oh, yeah, all of these [new] deals are tighter," he said.

Hewlett Packard trades tighter

Hewlett Packard's 6.125% notes due 2014 were trading at 425 bps bid, 420 bps offered, the trader said. That's in from the 460 bps spread at which the Palo Alto, Calif.-based computer, printer and peripherals maker had priced its $2 billion of new bonds on Tuesday.

Another market source quoted the bonds at 420 bps bid, some 35 bps tighter than their Wednesday level.

Potomac deal seen offered

Potomac Electric's new $250 million of 7.90% bonds due 2038 were being offered at 445 bps over, with no bid seen; the utility operator's deal had priced on Wednesday at 462.7 bps over.

Another Wednesday deal, Enterprise Products Operating LLC's $500 million of 9.75% notes due 2014, was being quoted at 810 bps bid, 805 bps offered.

Con Ed seen steady

On the other hand, Consolidated Edison Co. of New York Inc.'s new $600 million of 7.125% notes due 2018 were seen by a trader at 450 bps bid, 448 bps offered, not far from the 450 bps over level at which the New York-based electric utility had priced the bonds on Tuesday, and where they had remained on Wednesday.

Railroad issues on a fast track

A market source saw Union Pacific Corp.'s 6.65% notes due 2011 having tightened some 60 bps on the day to 475 bps over.

Sector peer CSX Transportation's 6.251% notes due 2023 meantime hovered around the 400 bps level, in more than 50 bps on the session.

Goldman gets better

Another sizable gainer was Goldman Sachs, which was among the financials continuing to take advantage of the new FDIC-backed short-term note-issue facility. Its existing 5.25% notes due 2013 were quoted 60 bps tighter on the day, at 670 bps over, with a busy $45 million of the bonds changing hands.

Analyst touts Goldman bonds

Goldman's bonds meantime may get a boost from Thursday's recommendation by Kathleen Shanley, the influential senior analyst of the Gimme Credit investment advisory service, that high-grade players buy the big New York-based investment bank-turned commercial bank's paper, saying that she expects spreads on Goldman's bonds "could tighten in coming months as financial markets begin to stabilize."

Shanley wrote in a research note that "bondholders are feeling somewhat more comfortable about Goldman's prospects than its shareholders," given the multiple steps which Goldman has taken over the last several months to bolster its capital position, including selling over $5 billion of common equity via a public offering and last week's sale of $5 billion of new FDIC-backed, AAA-rated bonds. She called the company's liquidity position "strong," and said that while Goldman is likely to show a fiscal fourth-quarter loss when it announces results on Dec. 16 - perhaps as much as $2 billion - "our view is that anticipation of a weak fourth quarter is priced in" to current trading levels.

At such levels, Shanley concluded - its 6.15% notes due 2018 closed Wednesday at 599 bps over - "we'd buy."

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