AutoZone, France Telecom sell bonds; American Airlines offers pass-throughs; new deals better

By Andrea Heisinger

New York, June 29 - New offerings trickled into the high-grade primary market Monday, including those from France Telecom and AutoZone, Inc.

A sale of pass-through certificates was announced by American Airlines Inc., although there was no word on whether the notes had priced or if the issue would wait until Tuesday.

Sources predicted a busy coming couple of days before a Thursday void of new deals before the Fourth of July weekend.

The secondary saw the new AutoZone and France Telecom bonds cautiously tighter. A recent bond from Campbell Soup Co. was only slightly better than its price Friday.

Spreads were slightly wider in general as Treasury yields contracted from Friday. The 10-year note was in 6 basis points to yield 3.48% with the five-year note only tightening 3 bps to yield 2.52%.

AutoZone sells $500 million

Memphis-based AutoZone priced $500 million 5.75% notes due 2015 at Treasuries plus 325 bps.

The deal was "definitely oversubscribed," a source close to it said.

Guidance was whispered in the low 300 bps area, he said, adding that there was no official price talk and the sale went straight into a launch.

J.P. Morgan Securities Inc. and Wachovia Capital Markets LLC were tapped as bookrunners by the auto parts and accessories chain.

Proceeds will be used for general corporate purposes, including to repay, redeem or repurchase existing debt, including commercial paper; for working capital, capital expenditures and new stores; to repurchase common stock; and for acquisitions.

France Telecom offers two tranches

France Telecom priced an upsized $2.5 billion notes in five- and 10-year tranches.

The size was increased from $2 billion, a source said.

The $1.25 billion of 4.375% five-year notes priced to yield Treasuries plus 195 bps.

A $1.25 billion tranche of 5.375% 10-year notes also priced to yield Treasuries plus 195 bps.

Active bookrunners were Banc of America Securities LLC and JPMorgan.

Proceeds are going to be used for general corporate purposes.

The Paris-based issuer provides internet and mobile phone service.

New deals sparse for short week

The days leading into the Fourth of July weekend will have only modest issuance, syndicate sources said Monday.

Tuesday is looking "fairly active," one of the sources said. "I'm hearing there are deals away too," he said. "We definitely have one more."

The amount of deals will drop off sharply after what few come out Wednesday, a source said. "Thursday will be absolutely dead," he said. "I would be surprised if anyone's actually at the desks."

There are no specific deals announced for the next couple of days, and, as always it depends on "what the tone decides to do," as one source said.

"We can pretty much assume tomorrow will be busier and then not a lot after that," he said.

American Airlines plans pass-throughs

American Airlines is planning a $520.11 million sale of pass-through certificates, according to 424B3 and FWP filings with the Securities and Exchange Commission.

The deal may have priced late Monday, a source away from the sale said. Because the deal is pass-through certificates, it is largely off the radar of the normal syndicate desks, he said. "We really don't pay any attention to those. They might as well not exist."

The notes will have an initial maturity of July 2, 2019 and a final maturity of Jan. 2, 2021. The average life is 7.3 years.

Bookrunners are Goldman Sachs & Co. and Morgan Stanley & Co. Inc.

Proceeds will be used to take delivery of new aircraft.

The commercial airline is based in Fort Worth, Texas.

AutoZone bond barely moves

The new 5.75% bond due 2015 from AutoZone was seen having barely moved from its price of 325 bps over Treasuries, a trader said.

The issue was quoted at 323 bps bid, 318 bps offered, he said.

France Telecom tranches firm

The two tranches priced by France Telecom were each tighter soon after pricing, a trader said, although the 10-year notes gained more. Both tranches priced at Treasuries plus 195 bps.

The 4.375% due 2014 was in about 10 bps to 185 bps bid, 182 bps offered. The 5.375% bond due 2019 tightened less to 189 bps bid, 184 bps offered.

Dow Chemical holds investor interest

Two bonds from Dow Chemical Co. hit the top of the most-traded list early Monday afternoon, a trader said.

The company is partnering with Algenol Biofuels in a pilot plant in Texas to turn carbon dioxide into fuel, according to an article in The New York Times.

Dow's 7.6% bond due 2014 and 8.55% due 2019 were popular with investors. The 2019 was also one of the biggest movers of the day, tightening about 25 bps from a week ago, a source said late in the day.

These bonds were followed by two telecom names - a sector that has been issuing with some frequency in past weeks.

Bonds from Vodafone Group plc and Comcast Corp. came in behind those from Dow.

Campbell Soup bond in slightly

The recent 3.375% bond due 2014 from Campbell Soup was only slightly better than its price Friday, a trader said.

The note priced at Treasuries plus 87.5 bps and was quoted at 83 bps bid, 73 bps offered by late afternoon.

Pepsi Bottling bond widens

An analyst from Stifel Nicolaus upgraded shares of Pepsi Bottling Group Inc. along with parent company PepsiCo Inc. on Monday, while one of the bottling group's bonds suffered. The upgrade was due to the continued growth of the business.

Pepsi Bottling's 4.625% bond due 2012 was about 40 bps wider than the previous week, a source said.

Bank, broker CDS better

Credit default swaps for bank and brokerage names were improved late Monday, a trader said.

They were uniformly in 7 to 10 bps, he said.

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