Bank of Montreal taps market; coming week seen more active; BMO, Morgan Stanley notes firm

By Andrea Heisinger and Cristal Cody

New York, Jan. 6 - There was a deal in the market Friday from Bank of Montreal, capping a week where Yankee and domestic financial names made their way back to the high-grade market.

Bank of Montreal's $1.5 billion sale of five-year senior notes followed Bank of Nova Scotia's $2.75 billion deal in three parts the previous day.

There was also a split-rated $500 million add-on priced by Icahn Enterprises LP and Icahn Enterprises Finance Corp.

The coming week is expected to have a more active calendar than the past one, sources said.

"We're looking at $15 [billion] to $20 [billion]," a syndicate source on a large desk said.

"Two or three are looking at Monday and then a couple more for the rest of the week."

The past week saw many Yankee issuers like the Canadian banks, but that could die down and make way for corporates, the source said.

Another market source was "not throwing around a number" for issuance in the coming week.

"I've heard of a few people looking at the market for Monday. It could be pretty busy right off the bat," the source said.

Bank of Montreal's new notes traded 7 basis points tighter in the secondary market.

"Financials are unchanged to better by 10 basis points," a source said.

Morgan Stanley's 5.5% notes due 2011 traded 10 bps better, and Bank of America Corp.'s 5% notes due 2021 firmed 5 bps.

Investment-grade bank and brokerage credit default swaps costs were lower on the day.

Bank paper CDS costs traded 3 bps to 10 bps lower. Brokerage company paper CDS costs were down 5 bps to 10 bps.

Looking at other sectors, Computer Sciences Corp.'s bonds traded a point better from the previous day.

"They're up again today," a trader said.

Bonds from Family Dollar Stores, Inc., which reported strong quarterly earnings on Thursday, were "unchanged" in Friday's session, a trader said.

The Markit CDX Series 17 North American Investment Grade index ended unchanged at a spread of 120 bps on Friday.

"Everyone was waiting to see what happened with non-farm payrolls and unemployment, and after that, we rallied a little bit, then faded back off that," a bond source said. "Most stuff is wrapped around unchanged."

Overall trading volume was about $11 billion on Friday.

Treasuries traded lower initially after a stronger-than-expected job report but moved higher on the day after Federal Reserve Bank of New York president William Dudley said additional monetary easing is possible. The benchmark 10-year Treasury note yield fell 3 bps to 1.96%, and the 30-year bond yield dropped 5 bps to 3.01%.

BMO's $1.5 billion deal

Bank of Montreal sold $1.5 billion of 2.5% five-year senior medium-term notes, series B, to yield Treasuries plus 170 bps, a source away from the trade said.

The paper (Aa2/A+/AA-) was sold in line with guidance in the 170 bps area.

J.P. Morgan Securities LLC was active bookrunner.

Proceeds will be contributed to the bank's general funds and used for general corporate purposes.

BMO last priced senior debt in a $1.1 billion sale in two tranches on April 26, 2011.

Bank of Montreal's new notes firmed in secondary trading to 163 bps bid, 159 bps offered, a trader said Friday afternoon.

The financial services company is based in Montreal and Toronto.

Entergy unit gives terms

Entergy Louisiana, LLC sold $250 million of 1.875% first mortgage bonds due 2014 on Thursday at a spread of Treasuries plus 150 bps, according to an FWP filing with the Securities and Exchange Commission.

The notes (A3/A-) were priced at 99.961 to yield 1.889%. There is a make-whole call option on the notes at Treasuries plus 25 bps.

BNY Mellon Capital Markets LLC, J.P. Morgan Securities LLC and Mitsubishi UFJ Securities (USA), Inc. were bookrunners.

Proceeds are being used to repay short-term debt under the Entergy system money pool and for general corporate purposes.

The company was last in the market with a $200 million sale of 4.8% 10-year mortgage bonds priced at 150 bps over Treasuries on March 21, 2011.

The utility subsidiary of Entergy Corp. is based in Baton Rouge, La.

Icahn's split-rated deal

Icahn Enterprises and Icahn Enterprises Finance priced an upsized $500 million split-rated add-on to their 8% senior notes due Jan. 15, 2018 (Ba3/BBB-) at 102.5 to yield 7.475% on Friday, an informed source said.

The reoffer price came on top of price talk.

Jefferies & Co., Inc. ran the books for the add-on, which was upsized from $350 million.

Proceeds will be used for general corporate purposes.

The original $1.15 billion issue priced at 99.275 to yield 8 1/8% in January 2010.

A previous $300 million add-on priced at 103.5 to yield 7.36% on Nov. 8, 2010.

Icahn Enterprises is a New York-based holding company primarily engaged in the investment management, automotive, metals, real estate and home fashion businesses.

Computer Sciences trades up

Computer Sciences' bonds traded higher on Friday.

The 6.5% notes due 2018 rose to 97.5 bid, 98.5 offered from 96.75 bid, 97.5 offered on Thursday, a trader said.

The company's 5.5% notes due 2013 edged up to 100.25 bid, 100.50 offered from 100.125, 100.375 the previous day.

The company's bonds and stock have been volatile in trading over the week after ratings downgrades. On Tuesday, Fitch Ratings placed Computer Sciences on negative watch over concerns with the company's health information contract with the U.K. government.

Computer Sciences said it may have to write off $1.5 billion related to the contract and will have to readjust its 2012 forecast.

Computer Sciences sold the tranches at par in February 2008 in a $1.7 billion private offering of senior notes (Baa1/A-/BBB+).

The information technology and services company is based in Falls Church, Va.

Family Dollar 'illiquid'

Family Dollar's 5% senior notes due 2021 traded unchanged on Friday at 102.5 bid, 103.5 offered, a trader said.

"Very illiquid," the trader said.

The notes priced on Jan. 25, 2011 at 99.494.

On Thursday, Family Dollar reported that its earnings rose 17.2% to 68 cents a share in the fiscal first quarter. Sales rose 7.6% to $2.1 million from the previous year.

The discount retailer is based in Charlotte, N.C.

Paul Deckelman and Paul A. Harris contributed to this review

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