JPMorgan, Enbridge, Hospitality Properties, USG sell notes; spreads tighten on new, secondary issues

By Andrea Heisinger and Paul Deckelman

Omaha, Sept. 24 - The beginning of the week came up short in terms of the volume market sources said they were expecting.

Nonetheless, there were several new issues that priced from JPMorgan Chase & Co., Enbridge Energy Partners, LP, Hospitality Properties Trust and USG Corp.

The investment-grade secondary market remained generally firm Monday, with advancing issues running about three-to-two ahead of decliners and spreads continuing to tighten on new financial-sector paper, particularly the new J.P. Morgan five-year issue.

The Lehman Brothers paper priced last week continued to have a robust feel to it, as its spread kept coming in. And the new Barclays plc hybrid paper was heard to have tightened markedly from its spread when it was issued.

Among new deals Monday, Kroger Co. added $300 million to its 6.4% 10-year senior notes to total $600 million. The original $300 million was issued on Aug. 15.

JPMorgan priced $1.25 billion in 5.375% five-year notes at a price of 99.913 to yield 5.395%, at a spread of Treasuries plus 110 basis points.

The Enbridge issue was upsized to $400 million from $300 million. The 30-year hybrid notes priced at 99.822 to yield 8.076%, or a spread of Treasuries plus 345 bps.

They have a coupon of 8.05% for 10 years, after which it switches to a floating rate of three-month Libor plus 380 bps.

Hospitality Properties sold an upsized $350 million in 6.7% senior unsecured notes due 2018. The issue priced at 99.136 to yield 6.82% with a spread of Treasuries plus 220 bps.

The issue was originally $250 million.

USG priced $500 million in 7.75% senior notes due 2018 at a price of 99.752 to yield 7.788% with a spread of Treasuries plus 315 bps.

Fannie, Freddie plan preferreds

Also announced were new issues of preferred stock from Freddie Mac and Fannie Mae.

Freddie Mac will sell $500 million in preferreds Tuesday, a market source said. Fannie Mae is also considering selling an issue of preferred stock this week, according to a release from the company.

Market sources commented that spreads on some new issues were better Monday than they may have been in the past few weeks.

"Oh yeah, they're definitely tighter," one source said. "It's been really busy today."

Despite decent volume, one source said he expected more.

"The market's down a little today and the 10-year Treasury is about 10 [bps] tighter," the source said.

The new issue premium on JPMorgan was surprisingly low, at about 5 to 7 bps, one source said. The premium has been about 30 bps for many recent issues.

There are more hybrid notes creeping into investment-grade trading after a virtual shutdown in the last couple of months for this kind of issue.

Everyone agreed that Tuesday would be a busy day although they offered no specifics on what might be coming.

Secondary trading was improving Monday.

"We're seeing a little better, about 5 to 7 [bps] tighter," a source said.

The $1.25 billion issue of hybrids from Barclays last week was trading significantly better, a market source said, pricing at Treasuries plus 280 bps and tightening to about 225 bps Monday.

JPMorgan, Lehman bonds keep firming

A trader said that the new J.P. Morgan 5 3/8% notes due 2012, which priced at 110 basis points over comparable Treasuries, had firmed slightly after it was released for secondary dealings, to 109/107 bps. He also saw the J P Morgan 6.80% capital securities due 2037, which had priced Friday at 195 bps, having come in to 190/188 bps.

"It traded as tight as 184 bps," he noted, "but it backed off at the end of the day."

The trader also saw the new Lehman Brothers 30-year bonds at 205 bps, "and that's probably another 10 [bps] tighter from Friday." Those bonds priced last week at 220 bps.

A trader at another desk saw the $1.25 billion of Barclays hybrids having come in significantly, to 225 bps, versus the 280 bps level at which they had priced.

However, another trader saw no aftermarket activity in Hospitality Properties' new 6.7% notes due 2018, which priced at 220 bps Monday, nor in the new five-year Florida hurricane catastrophe bonds, which came at 78 bps over.

Issuers upsize offerings

The trader did note that there had been "some upsizing today" in investment-grade land, including the new JP Morgan deal, which grew to $1.25 billion from $1 billion, and the Hospitality Properties offering, upped to $350 million from $250 million.

Looking ahead, the trader noted the demise of the prospective debt-funded $8 billion buyout of upscale audio equipment maker Harman International Industries Inc., which ran aground when the private equity firms doing the deal pulled out, spooked by tightening global credit conditions. Meanwhile, Oct. 5 "is the slated closing day for Sallie Mae [parent SLM Corp.]," which is being acquired via a debt-financed buyout transaction. I think people are waiting to see what happens with that.

"Rumor has it they're all together - and they may offer a lower price."

Among the established bonds upside movement was seen in such names as AT&T Wireless Services, whose 8 1/8% notes due 2012 tightened down to 114 bps over Treasuries, a 19 bps pickup.

General Electric Capital Corp.'s 5.40% notes due 2017 were seen having firmed about 8 bps, to 98 bps, while its 6.15% notes due 2037 were 7 bps tighter at 102 bps.

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