Citigroup, Con Ed, lead busy primary session; short Xerox bonds continue to firm, Citi eases

By Paul Deckelman and Sheri Kasprzak

New York, Dec. 2 - The strong pace of new-issuance continued Wednesday in the investment-grade market, which saw pricings from such familiar issuers as Citigroup Inc. and Consolidated Edison Co. of New York Inc.

New York-based banking giant Citigroup remarketed nearly $2 billion of six-year notes; meanwhile, its Manhattan neighbor and electric service provider, Con Ed, successfully priced an upsized offering of 30-year bonds which tightened modestly once they moved over into the secondary market.

Another power company, South Carolina Electric and Gas Co., priced an offering of 30-year first mortgage bonds, which stayed around their issue price after they were freed to trade.

In the financial realm, besides the new Citi deal, pricings were seen from Equity One Inc., Credit Agricole and a two-part offering of fixed and floating-rate notes from Finance for Danish Industry A/S.

The secondary market again saw busy dealings in recently priced paper, none busier than the big three-part offering which Xerox Corp. priced on Tuesday. The company's five-year was not only the most actively traded high-grade bond on Wednesday, but also managed to tighten further from the already tight aftermarket levels it had seen in Tuesday's initial dealings.

Among established issues in the secondary arena on Wednesday, a market source said the CDX Series

13 North American high-grade index had tightened by 2 basis points to a mid bid-asked spread level of 101 bps.

Advancing issues moved back ahead of the decliners, although only by a relative handful of issues - a couple of dozen out of more than 4,000 issues tracked.

Spreads in general were seen tighter, in line with continued higher Treasury yields; for instance, the yield on the benchmark 10-year notes rose by 3 bps Wednesday to 3.31%.

Overall market activity, reflected in dollar-volume totals, rose by 4.5% from Tuesday's pace.

Citi remarkets $1.875 billion

A remarketing of notes from Citigroup Global Markets Inc. led solid primary action Wednesday.

The investment bank sold $1.875 billion of previously issued senior notes.

The 6.01% notes (A3/A/A+), which are due 2015, were originally issued as 6.32% junior subordinated deferrable interest debentures in December 2007 as part of the sale of Upper DECS Equity Units by Citigroup Capital XXIX, a mandatory convertible structure. The original notes were due March 15, 2041.

The non-callable notes were priced at 101.87 to yield 5.582%. The spread was 350 basis points over Treasuries.

Citi was the bookrunner for the sale.

Citigroup is a financial services company headquartered in New York.

Credit Agricole sells $750 million

Another banking firm, France's Credit Agricole, priced $750 million in notes Wednesday, said a term sheet.

The notes (Aa1/AA-/AA-) were sold in a Rule 144A private placement through joint bookrunners Bank of America Merrill Lynch and Calyon.

The coupon came in at three-month Libor plus 18 basis points, priced at par. The notes are due June 7, 2011.

Proceeds will be used for general corporate purposes.

Credit Agricole, based in Paris, is a retail banking company.

Con Ed prices $600 million

Elsewhere Wednesday, Consolidated Edison of New York, a subsidiary of Consolidated Edison Inc., priced $600 million in 5.5% debentures. The offering was upsized from $500 million.

The notes (A3/A-/A-) were sold off a shelf registration.

Citigroup Global Markets Inc., J.P. Morgan Securities Inc., Mizuho and UBS were the joint bookrunners.

The debentures are due Dec. 1, 2039, and were priced at 99.622 to yield 5.526%. The spread came in at 128 basis points over Treasuries.

Proceeds will be used for general corporate purposes, including the repayment of short-term variable-rate debt.

Based in New York, Consolidated Edison is a utility provider.

Equity One sells $250 million

Also on Wednesday, Equity One Inc. priced $250 million in senior unsecured notes Wednesday, said a term sheet.

The 6.25% notes priced at 99.136 to yield 6.454%. The notes (Baa3/BBB-/) were sold off a shelf. The spread came in at 437.5 basis points over Treasuries.

The notes are due Dec. 15, 2014.

Bank of America Merrill Lynch, J.P. Morgan Securities Inc. and Wells Fargo Securities Inc. were the joint bookrunners.

Proceeds will be used to pay down a revolving credit facility and other debt, including mortgage debt. The remainder will be used for general corporate purposes.

Headquartered in North Miami Beach, Fla., Equity One is a real estate investment trust that acquires, constructs and operates shopping centers.

Con Ed powers up, S.C. is steady

When the new Con Edison 5.50% bonds due 2039 were freed for secondary dealings, a trader saw them tighten to 124 bps bid, 123 bps offered.

The New York-based utility company had priced its $600 million of bonds, upsized from $500 million originally, at 128 bps over.

Also among the power names, a trader saw South Carolina Electric & Gas's 5.50% first mortgage bonds due 2039 bid at 130 bps, with no offer level seen.

The Cayce, S.C. utility company had priced its $150 million of bonds earlier in the session at a spread of 130 bps over.

Equity One improves a little

A trader said that Equity One's new 6.25% notes due 2014 firmed to 430 bps bid, 425 bps offered.

The Florida-based real estate investment trust company had earlier priced its $250 million issue at 437.5 bps over.

Xerox tightening continues

A trader said that Xerox's new issue remained actively traded on Wednesday, with its $1 billion of 4.25% notes due 2015 topping the investment-grade volume leaders, with $100 million traded. The bonds continued tightening to 195 bps bid, 190 bps offered. They had traded on Tuesday at a spread versus comparable Treasury issues of 201 bps bid, 197 bps offered from their spread at pricing of 225 bps over.

The Stamford, Conn.-based copier company's $650 million of 5.625% notes due 2019 were the third-most active issue, with $85 million traded. They finished at 215 bps bid, 210 bps offered, slightly wider than 212 bps bid, 208 bps offered on Tuesday -- but still well inside their 237.5 bps spread at pricing.

The $350 million of 6.75% bonds due 2039 meantime remained at 240 bps bid, 235 bps offered, in some 10 bps from their 250 bps spread at pricing, but were not actively traded Wednesday.

Citi off on new-deal news

A trader said Citigroup's bonds were about 5 bps wider on the session, generically speaking, in response to the news of the company's big new deal. Other financial names, he said, were tighter.

A market source at another desk quoted Citi's 5.50% notes due 2014 at about 310 bps over.

J.P. Morgan warning draws mixed response

Also among the financials, market participants had a mixed reaction to a warning that J.P. Morgan Chase & Co. could see revenues decline by as much as $3 billion if it is forced by legislation to list most of its derivative transactions on an exchange.

Analysts for Sanford C. Bernstein & Co. projected a worst-case scenario of JPM's earnings being reduced by as much as 20 cents per share should this occur.

However, a trader said that the big New York-based banking company's bonds were not on the Most Actives lists, and further opined that "it doesn't look like the news did anything. It didn't look like much happened with the bonds."

On the other hand, a market source at another desk saw the company's 4.75% notes due 2015 about 20 bps wider on the session at 145 bps over, while seeing its 5.85% bonds due 2035 having tightened by around that same amount to the 265 bps over level.

Little change in bank CDS prices

A trader who follows the credit-default swaps market said that the cost of insuring a holder of big-bank bonds against a possible event of default was unchanged to 2 bps tighter on the session.

He also saw CDS costs for major brokerage house paper unchanged on the session.

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