H.J. Heinz, Magellan, Tyco Electronics, ANZ, TIAA price; market peaks early, slides by close

By Andrea Heisinger and Paul Deckelman

Omaha, July 9 - A window opened Wednesday morning after days of volatility, and companies took advantage of the conditions, including H.J. Heinz Co., Magellan Midstream Partners LP, Tyco Electronics Group SA, ANZ National International Ltd., and TIAA Global Markets Inc.

"Things were a little bit busier today, that's for sure," one source said.

Another said they were thankful issuance picked up because "things were starting to get boring."

The open was solid Wednesday, a source said, although it slid before the afternoon's close.

In the investment-grade secondary market Wednesday, advancing issues again led decliners by a better-than five-to-four ratio, while overall market activity, reflected in dollar volumes, rose 26% from Tuesday's pace.

Spreads in general were wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year note narrowed by 7 basis points to 3.81%.

Magellan oversubscribed

One of the first issues to be announced for the day was from Magellan Midstream Partners.

The energy company priced $250 million of 6.4% 10-year senior unsecured notes at 99.992 to yield 6.401% with a spread of Treasuries plus 255 basis points.

This was in line with price talk of the 255 bps area, a source close to the issue said.

The notes were seen at 253 bps bid, 250 bps offered after pricing, he said.

"The market tone was good today and they [the company] saw numerous others coming in," the source said. "It was a good day today and the market opened well today. They just saw a couple of other things in the market and decided to jump in."

The issue was about one-and-a-half times oversubscribed.

Bookrunners were Wachovia Capital Markets and Banc of America Securities LLC.

Tyco Electronics matches talk

Another issue came from Tyco Electronics, with $300 million in 5.95% senior notes due 2014 priced at 99.972 to yield 5.956% with a spread of Treasuries plus 287.5 bps.

The deal priced in line with talk of the 287.5 bps area.

The issue had some flexibility, a source close to it said, with the company willing to go up to $350 million if it was significantly oversubscribed, or as low as $250 million.

Goldman Sachs & Co. and UBS Investment Bank ran the books.

Heinz brings $500 million

H.J. Heinz priced $500 million 5.35% five-year notes at 99.965 to yield 5.358% with a spread of Treasuries plus 225 bps.

Banc of America, J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Inc. were bookrunners.

ANZ ends wait

Some of the day's issues priced under Rule 144A.

ANZ priced $2 billion 6.2% five-year senior notes at 99.906 to yield 6.222% with a spread of Treasuries plus 312.5 bps.

The issue has been sitting on the shelf since its two-day roadshow ended two weeks ago.

The company was waiting for market conditions to improve, and decided to jump in Wednesday.

"This was softly announced this morning, and the company saw others were coming in and decided to do the same," a source said.

A unit of TIAA priced $500 million of 4.95% five-year medium-term notes at 99.974 to yield 4.956% with a spread of Treasuries plus 180 bps.

Deutsche Bank Securities Inc., J.P. Morgan and Lehman Brothers Inc. were bookrunners.

Conditions worsen by close

Although the market opened on a high note Wednesday, that was not the case by the end of the day.

"It was not too positive a backdrop to go out on," a source said. "We had what amounted to a half-day of issuance. Everybody announced their issues this morning and got things done quickly. Things were in and out in one day."

The day's issuance would normally ensure at least a few issuers would come into the market Thursday, but it's not likely that will be the case, sources said.

"The way the markets went today, I'd be surprised if anything performed in the break," one source said. "It's unlikely we'll see much tomorrow."

Most of the day's issues priced in line with where they were talked, which was an indication that the weaker market conditions amounted to not a lot of leverage with investors, a source said.

Magellan steady in trading

A trader said that the new Magellan Midstream Partners LP LP 6.40% senior notes due 2018 were unchanged when they were freed for secondary dealings, still trading at the same spread of 255 bps over comparable Treasuries at which the bonds had priced earlier in the session. The company's outstanding 5.65% notes due 2016 were quoted at 240 bps over.

No secondary dealings were seen in the Tyco Electronics or Heinz issues, which priced too late in the session for any meaningful aftermarket action.

Market wider

The trader opined that "it looks like everything is going wider. There are a lot of bid-wanted lists" soliciting potential buyers.

He said that "a lot of people are trying to raise cash for the new deals" which are expected to hit the market, now that the Independence Day holiday break - which put the primary market on a virtual hiatus for about two weeks before July 4 - has come and gone.

He said that "spreads are under a little bit of pressure - along with everything else in this world, with the stock market getting crushed." Spurred on by negative financial news, the bellwether Dow Jones Industrial Average gave up its small early gains to finally plunge 236.77 points, or 2.08%, ending at 11, 147.44, while broader market indexes were likewise lower.

But the main motivation behind the spread widening, he reiterated was that investors "want cash on hand" to buy the anticipated new deals.

A typical investment-grade credit trading Wednesday was Caterpillar Financial Services Corp.'s floating-rate notes due 2009, which were seen by a market source having widened out to a spread of 79 bps over from 62 bps on Tuesday, as volume about tripled.

Among the financial issues, J.P. Morgan Chase & Co.'s 6.40% notes due 2038 were seen having widened out to some 242 bps over from Tuesday's levels around 219 bps.

General Electric Capital Corp.'s 5.625% notes due 2017, however, hung in there, relatively speaking, with only a slight widening to 199 bps from 195 bps previously, while Coca-Cola Co.'s 5.35% notes due 2017 actually tightened slightly, to 125 bps from 129 bps, the source said.

MBIA surplus notes jump

Elsewhere a trader saw bond insurer MBIA Inc.'s 14% surplus notes due 2033 up 7 points on the session to 55 bid, 57 offered. Those bonds - considered junk despite the Armonk, N.Y.-based company's nominal investment-grade rating - had previously risen about 5 points to the 47 mark on Tuesday. The trader said that just about "all of the action" that he saw Wednesday was in MBIA.

The bonds rose smartly after the New York State Insurance Department gave the troubled company the green light to make a scheduled $70 million interest payment on July 15. State insurance regulatory approval is a necessary condition of any interest payment, according to the bonds' indenture.

In January, MBIA - beset by speculation that it might not be able to pay any spike in bond default claims arising out of the mortgage-based credit crunch - issued $1 billion in surplus notes to help shore up its balance sheet.

In the credit-default swaps market, a trader said that debt-protection costs for big-bank bonds was 2 to 3 bps narrower, while CDS costs for major brokerage paper was unchanged.

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