Virginia Electric & Power, GATX price deals amid strong primary tone; secondary sees low volume

By Andrea Heisinger

New York, Nov. 3 - Virginia Electric & Power Co. and GATX Corp. priced investment-grade securities Monday as others looked at the market but opted to not price their issues ahead of Tuesday's election.

Sources said the market tone remained attractive to investors and issuers as more deals were successfully priced and were seen tighter in secondary trading.

The secondary market was quiet, with low volume. A source said it's likely Tuesday will be just as slow.

Virginia Electric prices

Virginia Electric & Power priced a $700 million issue of 8.875% 30-year senior notes Monday at 99.995 to yield 8.875%, or Treasuries plus 456.3 basis points.

The issue was talked at a coupon in the 9% area, a source close to the deal said. Most issues are still being priced at a coupon because that is what investors are looking at, he said.

Bookrunners are Citigroup Global Markets Inc., Goldman Sachs & Co. and RBS Greenwich Capital.

The company intends to use the proceeds for repayment of maturing medium-term notes or short-term debt.

GATX taps market

Leasing company GATX priced $203.477 million of five-year pass-through trust certificates at par to yield 9%, or Treasuries plus 627 bps.

The company concurrently issued equipment notes at par.

Citigroup Global Markets Inc. and Banc of America Securities LLC ran the books.

The success of the issue will likely add to the improved market tone of the last week, a source said.

"It showed that an issuer with a high-B rating can get a deal done in this environment," he said. The issue was backed by equipment notes, which also aided confidence, he added.

Colgate deal planned

A deal is reportedly in the works from Colgate-Palmolive Co., market sources said Monday, although no timing was given.

On Friday the company filed a shelf registration with the Securities and Exchange Commission for $1.5 billion in medium-term notes. A secondary source said Monday that they heard the company was planning a deal.

When asked late Monday afternoon, a source at one of the listed bookrunners said they did not know of solid plans for an issue but that it was possible one could come out this week.

Citigroup, Deutsche Bank Securities, Goldman Sachs & Co., J.P. Morgan Securities Inc., Merrill Lynch and Morgan Stanley & Co. Inc. were listed as bookrunners in Friday's SEC filing.

Primary tone up

The tone in the primary market was up on Monday following the day's successful issues and those of late last week.

A source said that "pretty much any day this week" was fair game for new issues - even Tuesday.

At least one source predicted the market would be quiet Tuesday as investors and issuers waited for the outcome of the presidential election.

"I don't know," a source said. "I think any imminent name that's [been] on the calendar since September or before has the opportunity to come into the market."

The investor interest and success of the recent new deals have set the tone for the market, he said, and have shown that new issue concessions are "coming down a bit," he said.

It's unclear which issuers are looking at the market this week. The wait-and-see trend of the past couple of months is still in effect as morning market conditions dictate issuance for the day.

A source said he was curious about what effect Tuesday's elections would have on new deals.

"People will be in and out of the office all day to vote, so it will be interesting to see how that affects [the market," he said.

Verizon bonds in further

The recent issue of 8.75% 10-year notes from Verizon Communications Inc. was seen in slightly from Friday, a trader said.

The bonds were at 444 bps bid, 439 bps offered Monday compared to 449 bps bid, 444 bps offered Friday. The notes priced at 487.5 bps.

There were no levels available for the second, 30-year tranche of the issue, with the trader saying they were not seen trading since Friday.

Estee Lauder tightens slightly

The recent 7.75% five-year bonds from Estee Lauder Cos. Inc. were seen at 445 bps bid Monday, a trader said, tightening from Friday's levels of 455 bps bid, 440 bps offered.

The notes priced at 500 bps over Treasuries.

Kimberly-Clark unchanged

The recent 7.5% 10-year notes from Kimberly-Clark Corp. were seen at 325 bps bid, 310 bps offered Monday, a trader said, which was virtually unchanged from Friday's level.

They were at 325 bps bid, 320 bps offered Friday compared to pricing at 362.5 bps over Treasuries.

Secondary quiet on election

Investor and trader eyes were trained on the upcoming presidential election Monday leading to a quiet day with low volume, a secondary source said.

"It's very quiet today," he said. "No one's doing anything."

Everything was "mostly unchanged from last week," he said.

Bank, broker CDS mixed

Credit-default swaps for bank and broker names were seen mixed Monday afternoon, a trader said.

Bank CDS were seen 2 bps tighter to 5 bps wider.

Broker names were mostly wider, with Goldman Sachs at 5 bps out, Morgan Stanley unchanged and Merrill Lynch 2 bps wider.

Daimler day's big mover

Daimler North America was seen as the big mover Monday as its 7.3% bonds due 2012 tightened 120 bps amid news of decreased sales and financial woes in the auto industry.

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