RasGas sells three tranches, Treasury fluctuations slow primary; Rowan adds, financials gain

By Andrea Heisinger and Paul Deckelman

New York, July 16 - The high-grade primary was monopolized Thursday by deals from companies in other countries. Among them, a pricing came from emerging markets name RasGas.

A road show was announced by Chilean logging company Celulosa Arauco y Constitucion SA, and it starts July 17.

There was a positive, $2.7 billion, second-quarter earnings announcement by JPMorgan Chase & Co., although its profit was not as great as the previous day's from Goldman Sachs & Co., which sparked a small boost to the high-grade primary and secondary. The JPMorgan earnings did not have the same impact on the primary, a source said.

In the secondary arena, a market source said the CDX Series 12 North American high-grade index narrowed by 1 basis point to a mid bid-asked spread level of 130 bps.

Advancing issues - which had fallen behind decliners on Wednesday - regained the lead on Thursday, holding a nearly nine-to-seven advantage.

Overall market activity, reflected in dollar-volume totals, fell 27% from Wednesday's pace.

Spreads in general were seen slightly wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year note came in about 3 bps on Thursday to 3.57%.

The new Rowan Cos., Inc. 10-year bonds were seen having tightened from the spread levels at which they had priced on Wednesday.

However, the upside burst in the new CareFusion Inc. bonds - which had firmed smartly on Wednesday from their Tuesday pricing levels - appeared to have run out of gas.

Financial bonds got a boost from good quarterly numbers reported by J.P. Morgan Chase & Co.

RasGas brings $2.23 billion

Qatar-based RasGas priced $2.23 billion of senior secured bonds in three-, five- and 10-year tranches, a market source said.

The $500 million 4.5% three-year tranche matched revised talk of Treasuries plus 300 bps, which had been narrowed from Treasuries plus low-to-mid 300 bps for a yield of 4.30%.

The $1.115 billion 5.5% five-year piece also matched revised talk, in this case of Treasuries plus 312.5 bps, reduced from Treasuries plus mid 300 bps for a yield of 5¼%.

The $615 million 6.75% 10-year issue again matched talk, for this tranche at Treasuries plus 325 bps, revised from Treasuries plus mid to high 300 bps for a yield of 6.35%.

Citigroup Global Markets, Credit Suisse Securities and HSBC Securities were bookrunners for the Rule 144A and Regulation S deal.

The issuer is based in Doha and is a government-run energy firm.

Primary quiets after rally

The small boost that Goldman Sachs' earnings gave both primary and secondary parts of the investment-grade market Wednesday had mostly faded by late Thursday, a syndicate source said. This was despite the follow-up of JPMorgan Chase announcing earnings on the plus side.

"I think it maybe gave bank and finance [names] a boost," the source said, adding: "Otherwise, not a whole lot."

News that junk-rated small-business lender CIT is likely heading for bankruptcy after being refused emergency bailout funds by the government also didn't do a lot to the high-grade market tone.

"There wasn't a lot less volume because of CIT," a source said.

The primary was most likely void of new offerings because of the instability of Treasuries throughout the week, the source said.

"They sold off earlier in the week," he said, "and people have been hopping in and out of the equity market because of it."

Other than that, there was nothing to blame for the slow flow of deals but continued earnings blackouts.

"It was pretty slow today," a source said. "We were just kind of finishing mopping up from earlier in the week, taking care of paperwork and stuff like that. Tomorrow should be the same thing."

Celulosa plans road show

Celulosa Arauco y Constitucion is planning a U.S. road show for a dollar-denominated 10-year bond, a market source said.

The road show will start on July 17 on the west coast, continue on July 20 in Boston and finish on July 21 in New York.

J.P. Morgan Securities was mandated to act as the active bookrunner, while BBVA Securities and Santander Investments will act as passives for the Rule 144A and Regulation S deal.

Arauco is a Santiago, Chile-based logging company.

A rousing rise for Rowan

When the new Rowan Cos. 7.875% notes due 2019 moved over to the secondary market - the Houston-based contract energy driller's issue had come to market too late on Wednesday for any aftermarket action - a trader saw those bonds having firmed to 410 bps bid, 405 bps offered.

That was well in from the 437.5 bps spread over comparable Treasuries at which the $500 million issue - upsized from an original $375 million - had priced on Wednesday.

New CareFusion firming stalls out

A trader saw all three tranches of CareFusion's $1.4 billion mega-deal around the same levels, if not slightly wider, on Thursday, than they had been on Wednesday, when those bonds had tightened solidly.

He saw its $250 million of 4.125% notes due 2012 trading at 255 bps bid, 245 bps offered, a little wider than Wednesday's 250 bps bid, 245 bps offered. That Wednesday level was well in from the 287.5 bps level at which they had priced on Tuesday.

Its $450 million of 5.125% notes due 2014 had widened to 265 bps bid, 255 bps offered from 262 bps bid, 258 bps offered Wednesday. The levels were still significantly tighter than the 300 bps over pricing spread.

And its 6.375% notes due 2019 traded at 275 bps bid, 265 bps offered, versus 274 bps bid, 269 bps offered on Wednesday. The San Diego-based medical products company - a spinoff from Cardinal Health Inc. - priced $700 million of the 10-years at 312.5 bps on Tuesday.

Financials seen firmer

Among the financial names, a trader said the sector "performed well," with Goldman Sachs Group Inc.'s paper continuing to tighten in the wake of the New York-based financial concern's good quarterly numbers reported Tuesday.

Goldman's new 3.625% non-FDIC backed notes due 2012, which had priced Wednesday at 212.5 bps over and then had firmed to 200 bps bid, 195 bps offered, were trading Thursday at 197 bps bid, 192 bps offered.

"They haven't moved in much," the trader said. "The other [existing] paper has moved in more."

He said that there were "a lot of factors" at play on Thursday.

"You had the CIT news, which brought equity futures in, then the JP Morgan news, which kicked them back up, and then Nouriel Roubini was talking and said the worst is over - and he's usually the most bearish of the bears."

The New York University professor's comments "put a bid in the market, which helped bonds considerably."

However, he added that "CIT is obviously still a huge drag." He said the company's troubles did not translate into any buying surge in General Electric Capital Corp.'s bonds, even though media stories said that GECC, a CIT competitor, would be helped by its rival's well-publicized woes. "There was nothing specific in GE."

He said that JP Morgan's earnings "surely didn't hurt, and I'm sure it helped in some way - but there were so many other factors today, and so many things driving it." The New York banking giant said its second-quarter earnings increased to $2.7 billion, or 28 cents a share, from $2 billion a year earlier. The per-share earnings easily beat Wall Street expectations of around a nickel per share.

Bank, brokerage CDS tighten up

A trader who watches the credit-default swaps market said that the cost of protecting a holder of big-bank bonds against a possible event of default, was 5 bps to 10 bps tighter, while brokerage company CDS costs were 5 bps tighter across the board. J.P. Morgan's debt-protection costs tightened by 5 bps to 90 bps bid, 95 bps offered.

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