Discover Financial sells split-rated bonds, RasGas, CapitalSource eyed; recent bonds firm

By Andrea Heisinger

New York, July 10 - It was a quiet Friday and end of a dull week that saw only a smattering of investment-grade bond sales. Discover Financial Services Inc. priced split-rated bonds that were held overnight after being announced late Thursday.

Qatar's RasGas announced an offering for the coming week via Rule 144A and Regulation S. Another announcement came late in the day from CapitalSource Inc., which is also selling bonds via Rule 144A.

New and recent issues were better in the secondary, a trader said late in the day. Although a trading level wasn't seen for the new Discover Financial issue, those from Korea Gas Corp. and Meccanica Holdings USA Inc. were better.

Spreads were significantly wider in general as Treasury yields tightened. The five-year note was 12 basis points tighter at a yield of 2.2% while the 30-year bond was 11 bps better at a yield of 3.19%.

Discover Financial bonds

Discover Financial Services sold $400 million of 10-year split-rated senior notes at par to yield 10.25%, equivalent to Treasuries plus 694.7 bps.

The notes (Ba1/BBB-/BBB) were sold off the high-grade syndicate desk, a source said Thursday when the sale was announced. It was unclear Friday how much of the interest in the trade was on the high-yield side of accounts, as sources close to the trade were mum on the levels from both desks.

"I can't say," one source said, with a co-manager for the trade saying he hadn't seen the books yet.

J.P. Morgan Securities Inc. was the bookrunner.

Proceeds will go for general corporate purposes.

The company recently completed a common stock sale, which was not dependent on the senior notes sale. It became a split-rated issuer in June when Moody's Investors Service downgraded the paper to junk. The company remains on the lowest rung of the high-grade ratings for Standard & Poor's.

The credit card and electronic payment company is based in Riverwoods, Ill.

Desks see volume staying low

Some syndicate sources said Friday that the lack of issuance could continue at least into the coming week.

"There was nothing today," a source at a large syndicate said. "We're not seeing much until probably Tuesday."

Of course, tone is a factor, and if things look good enough Monday there could be a couple of go calls, he said.

A source at a second desk said essentially the same thing.

"We're looking slow," he said. "There are a couple of potentials on the calendar, but nothing firm."

A newly announced deal from RasGas and another from CapitalSource are about the only thing in the pipeline.

"Once earnings are done we will see more," a source said. "It's summer though."

CapitalSource to sell $300 million

CapitalSource is planning a sale of $300 million in five-year senior notes, according to a press release from the company late Friday.

The deal will be sold via Rule 144A and is guaranteed by CapitalSource Finance LLC.

Proceeds will be used to make a $300 million payment required under the terms of a credit facility amendment.

The commercial lender is based in Chevy Chase, Md.

Qatar's RasGas plans sale

RasGas plans to offer a dollar-denominated benchmark-sized bond in three-, five- and 10-year tranches, a market source said.

Citigroup Global Markets Inc., Credit Suisse Securities and HSBC Securities are bookrunners for the Rule 144A and Regulation S issue.

The issue is expected to price during the week of July 13.

The issuer is a Doha, Qatar-based energy firm specializing in liquefied natural gas.

Korea Gas bond firms

The new 6% bond due 2014 from Korea Gas was firmer late Friday, a day after selling at Treasuries plus 390 bps.

A trader said the bond was quoted at 373 bps offered, with no bid given.

Meccanica bonds in nicely

Meccanica Holdings USA's two-tranches of bonds sold Wednesday had tightened considerably as of late afternoon Friday, a trader said.

The 6.25% due 2019 was in about 25 bps to 274 bps bid from pricing at 305 bps over Treasuries.

A tranche of 7.375% bonds due 2039 priced at 330 bps over Treasuries and was quoted at 293 bps bid.

Marathon Oil, Dell top trading

Outstanding bonds from Marathon Oil Corp. and Dell Inc. were at the top of trading late Friday afternoon, a market source said.

Marathon's 7.5% due 2019 was at the top. The company's stock was up in trading, but trading with losses overall, as are other big-name oil companies.

Dell's 5.875% due 2019 was behind the Marathon bond. The computer maker was upgraded by an analyst at Goldman Sachs who predicted Friday that hardware stocks would improve in the latter half of the year and into 2010.

Bank, broker CDS mixed

The credit-default swaps for bank and brokerage names were mixed by late afternoon, a trader said.

Bank names were 2 bps tighter to 5 bps wider, he said. Brokerage names were a little less varied at unchanged to 5 bps wider.

Financials top big movers

Two of the biggest moves for the day came from bonds issued by two of the biggest financial names.

Notes from Citigroup Inc. and Goldman Sachs Group Inc. were each moving around by late Friday, a source said.

Citigroup made the biggest shift by far, with its 5.625% note due 2012 tightening nearly 200 bps from a week ago. The move followed news of shake ups in the financial giant's leadership.

Goldman Sachs was not as lucky and saw one of its bonds move in the other direction. Its 5.3% due 2012 was about 145 bps worse than the previous week.

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