Diageo reopens notes, primary remains weak; secondary sees Altria, Diageo issues tighten

By Andrea Heisinger

New York, Nov. 7 - Diageo Capital plc priced a reopening of notes Friday on an otherwise quiet day filled with unpleasant unemployment and economic news.

Unemployment numbers were released, and the number for October came in at a 14-year high.

The secondary saw most recent issues continue to tighten.

Diageo reopens notes

The funding arm of premium drink company Diageo reopened its 7.375% notes due 2014 to add $500 million.

The reopened notes were at 101.967 plus accrued interest, to yield 6.905%, or 435 basis points.

This brings the total issue size to $1.5 billion, including the $1 billion priced Oct. 16. That issue was priced at 462.5 bps over Treasuries.

Banc of America Securities LLC, Credit Suisse Securities, Goldman Sachs & Co., and HSBC Securities were bookrunners.

The deal "went alright," a source close to it said. "It was nothing special," he added.

Week nets $10 billion issuance

The week ended with more than $10.239 billion in new issues, the majority of which came from a single deal. This was nearly twice as much as the previous week's $5.85 billion showing.

The $6 billion issue from Altria Group Inc. Wednesday renewed hope in the primary market, as well as in the secondary where the bonds have "held tight," according to traders.

The issue was the largest since May 6 when GlaxoSmithKline priced $9 billion in multiple tranches.

Guessing game for week ahead

The coming week is largely an unknown as Friday remained weak.

"Today wasn't the most positive tone," a source said, repeating what had been said about the past couple of days.

"There could be an issue Monday, but it's not likely."

It's also not likely because of Tuesday's market close for the Veterans Day holiday.

One source said he thought issuers would feel out the market Wednesday morning and make a decision from there.

It was difficult to tell how much effect Friday's grim earnings news from the auto industry, and unemployment numbers, had on the primary market, a source said.

"There wasn't much to go on," he said. "There was Diageo, but that was a reopening so it's pretty hard to tell."

The stock market was surprisingly mostly unaffected by the day's news and did not nosedive after the announcements.

"I don't know how much anyone is watching these things," a source said. "They're kind of expected."

A large backlog of issues remains and continues to build. Although a small amount of this was accounted for in deals this week, there's plenty more where it came from.

Diageo notes tighten

Friday's reopened notes from Diageo Capital were seen more than 15 bps tighter after pricing, a trader said.

They were quoted at 420 bps bid and 415 bps offered, in from the 435 bps pricing level.

Altria bonds remain tighter

The three tranches of Wednesday's $6 billion issue from Altria Group were seen tighter Friday afternoon, a trader said.

The five-, 10- and 30-year tranches all priced at Treasuries plus 600 bps, and were all trading at 565 bps bid, 560 bps offered, he said.

Another recent issue, the 7.75% 10-year notes from Atlantic City Electric Co. priced Thursday were not seen trading, he said.

Transocean at top of trading

The 6% bond due 2018 from Transocean Inc. was at the top of the trading volume list early Friday afternoon.

This comes after the oil drilling company's third-quarter earnings results were announced Wednesday, showing a 14% profit increase from 2007.

Low volume in secondary

The secondary market saw little action Friday as the primary market was relatively quiet and only some of the recent issues were trading.

"It's not too exciting," a secondary source said.

There was not much change seen in many recent issues, although the three tranches of Altria bonds remained about 40 bps tighter than they were at pricing Wednesday.

"They're hanging in there," the source said.

Goldman, Time Warner top movers

Goldman Sachs' 6.875% notes due 2011 were seen as one of the day's top movers Friday, tightening more than 40 bps.

The investment bank's 5.45% bonds due 2012 were also seen moving, but out instead of in. They were more than 20 bps wider.

Time Warner Entertainment's 8.375% bonds due 2033 were nearly 30 bps wider by late afternoon.

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