Dover, Burlington Northern, Lockheed, Northern States, PPL price; Fed move viewed as boost but not fix

By Andrea Heisinger and Paul Deckelman

Omaha, March 11 - An announcement from the Federal Reserve provided a boost to the investment-grade market, and encouraged pricing of issues from Dover Corp., Burlington Northern Santa Fe Corp., Lockheed Martin Corp., Northern States Power Co., PPL Energy Supply, LLC and the European Investment Bank.

The news that the Fed would aid banks with loans of up to $200 billion was not a complete surprise, a source said.

"Things kept getting worse and everyone was expecting something else to come before the [Fed] meeting next week," he said. "Everyone was expecting some sort of decisive action, and it came this morning."

The Fed meets March 18, and another rate cut is anticipated.

Tuesday's issues reflected the good news, with many of them pricing at or tighter than price guidance.

In the investment-grade secondary market Tuesday, declining issues outnumbered advancers by a nearly two-to-one ratio, while overall market activity, reflected in dollar volumes, rose about 19% from Monday's levels.

Bear Stearns Co. bonds - which had widened out sharply on insolvency rumors around the Number-Five U.S. brokerage company - bounced back solidly on Tuesday as the company again denied that it faced any kind of liquidity troubles.

Bear's credit-default swap spreads - which also widened out badly on Monday - likewise came in solidly on Tuesday, amid general strength in the financial sector following the Federal Reserve's announcement of coordinated efforts with other central banks to bolster international capital market liquidity.

Washington Mutual, Inc.'s CDS costs also tightened markedly, and its shares jumped, as rumors circulated the big thrift might soon be getting a large equity infusion - perhaps from billionaire market legend Warren Buffett.

Apart from the financials, there was some activity in some of the new-deal names including Dover Corp., Burlington Northern and PPL Energy.

Dover at tight end

Dover Corp. priced $600 million in two tranches.

The $350 million 5.45% 10-year tranche priced at 99.725 to yield 5.486% with a spread of Treasuries plus 190 basis points.

This was at the tight end of talk of 190 to 195 bps.

The $250 million of 6.6% 30-year notes priced at 99.818 to yield 6.614% with a spread of Treasuries plus 210 bps.

The tranche also came at the tight end of talk of 210 to 215 bps.

Bookrunners for the 10-year tranche were J.P. Morgan Securities Inc., Banc of America Securities LLC and Deutsche Bank Securities Inc.

Those for the 30-year tranche were J.P. Morgan, Goldman Sachs & Co. and RBS Greenwich Capital.

Burlington upsizes

Burlington Northern priced an upsized $650 million of 5.75% 10-year notes at 99.767 to yield 5.781% with a spread of Treasuries plus 220 bps.

The issue was increased from $500 million.

Banc of America, Barclays Capital Inc. and Wachovia Capital Securities LLC were bookrunners.

Lockheed oversubscribed

Lockheed Martin priced $500 million of 4.121% five-year notes at par to yield 4.121% with a spread of Treasuries plus 157 bps.

Goldman Sachs was bookrunner.

This was at the tight end of talk of 160 bps area, a source close to the deal said.

The issue went well, and likely would have regardless of the Fed news.

"They're an infrequent issuer," the source said. "I think the last time they did an issue was in 1999. Investors like to buy their stuff. There was no problem getting an oversubscribed book or generating interest."

Northern States beats talk

Northern States Power priced $500 million of 5.25% 10-year first mortgage bonds at 99.696 to yield 5.29% with a spread of Treasuries plus 170 bps.

Barclays and J.P. Morgan ran the books.

PPL Energy Supply priced an upsized $400 million of 6.5% 10-year senior notes at 99.661 to yield 6.544% with a spread of Treasuries plus 295 bps.

This was tighter than price talk of 300 bps area, a source said.

Books were run by Barclays, Goldman Sachs and RBS Greenwich.

An issue from European Investment Bank also reportedly priced, a market source said.

The bank priced $3 billion of five-year global notes at Libor minus 25 bps, the source said.

Bookrunners were J.P. Morgan, Merrill Lynch, Pierce, Fenner & Smith Inc. and Morgan Stanley & Co. Inc.

Utilities exploit market worries

The number of utilities and lack of financials issuing is definitely related to the rocky market conditions, a source said.

"First mortgage bonds are able to do well because they're secure and collateralized," he said. "If there's security out there right now, that's where it is."

"Financials have avoided the marketplace lately. It's too shaky for them to get in."

The source also noted that new issue premiums are, on average, in the 20 bps area right now.

The news from the Fed was a significant step that hasn't been seen in a while, one source said.

It boosted some things about 20 bps tighter and others around 30 bps, he said.

Although it helped things in the short run, it's essentially a bandage, sources said.

"It's not like today fixed everything," a market source said. "There are obviously still some problems out there with the housing market."

Issuance should be about the same Wednesday, if not more.

"We will absolutely see more tomorrow," a source said. "It could be a busy one."

The Bear roars back

After taking a drubbing on Monday, Bear Stearns' bonds were seen having firmed smartly, helped by the company's reiteration that it faced no liquidity problems.

A market source saw its 6.4% notes having tightened about 25 bps on the session to around 620 bps over comparable Treasuries, making up for some of the ground lost on Monday.

Another source estimated that the notes may have tightened as much as 40 bps on the session to as low as the 615 bps level.

Those bonds were among the most actively traded of the session.

Other Bear bonds seen to have firmed solidly in active dealings included the company's 7¼% notes due 2018 and its 2.875% notes coming due in July.

A trader saw the company's credit-protection costs for its debt tightening 60 bps on the day to 540 bps bid, 560 bps offered, after having zoomed out as far as 630 bps on Monday.

Bear Stearns shares were also up, given a boost as the company continued to reiterate that there were no liquidity problems, market rumors aside.

Its former CEO, Alan "Ace" Greenberg, called such speculation "totally ridiculous."

Meanwhile, Securities and Exchange Commission Chairman Christopher Cox said the SEC is comfortable with capital levels at the five largest U.S. investment banks - a group which includes No. 5 Bear Stearns.

WaMu comes in

Another financial name seen taking advantage of the generally better climate in the sector was Washington Mutual - which was also pushed upward by market rumors, totally unconfirmed - that the big thrift could get a cash infusion from either Goldman Sachs or Warren Buffett. Nobody would confirm or deny any such rumors.

That made WaMu stock jump 18%, while a trader saw its CDS protection costs tighten by 35 bps to 665 bps bid, 695 bps offered.

New issues firm a bit

Among newly priced issues, a trader saw them doing "a bit of all right."

He saw the new Burlington Northern 5.75% notes due 2018, which priced at a spread of 220 bps, trading as good as 216 bps bid although "for the most part" they were at 218 bps bid, 216 bps offered.

The new PPL Energy 6.5% notes due 2018, which priced at 295 bps over, tightened to the "low 290s."

Northern States Power's 5.25% notes due 2018, which came at 170 bps over, got as good as 166 bps bid, 164 bps offered, while Dover Corp.'s new bonds were "a couple better bid" from their pricing spreads of 190 bps over for the 10-years and 210 bps over for the 30-year paper.

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