Xerox, Great River, Fifth Third, Morgan Stanley, Textron, Export Development Canada price on solid tone

By Andrea Heisinger and Paul Deckelman

Omaha, April 23 - Diversity peppered the investment-grade issuers Wednesday, with Xerox Corp. and Great River Energy mingling with the financial names like Fifth Third Bancorp, Morgan Stanley, Textron Financial Corp. and Export Development Canada.

"It was good to see some non-financial flow," a market source said.

In the investment-grade secondary market Wednesday, advancing issues led decliners by a seven-to-six ratio, while overall market activity, reflected in dollar volumes, fell by about 11% from Tuesday's pace.

Spreads in general narrowed as Treasury yields rose, with the yield on the benchmark 10-year issue, for instance, widening out by 4 basis points to 3.73%.

The new Xerox five-year bonds were seen having tightened a bit after their pricing earlier in the session. A trader surmised the 10-years did likewise.

Boeing Co.'s bonds firmed, as the aircraft manufacturing giant reported better earnings.

But bad earnings for bond insurer Ambac Financial Group caused its debt-protection costs to widen out.

Xerox sells $1.4 billion

Xerox priced $1.4 billion of notes in two tranches.

The $400 million in 5.65% five-year notes priced at 99.996 to yield 5.65% with a spread of Treasuries plus 267 bps.

The $1 billion in 6.35% 10-year notes priced at 99.856 to yield 6.369% with a spread of Treasuries plus 262 bps.

Barclays Capital Inc., Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. were bookrunners.

Morgan Stanley matches talk

Morgan Stanley priced $1.5 billion of 6% seven-year medium-term notes at 99.876 with a spread of Treasuries plus 275 bps. This was in line with price guidance, a market source said.

Morgan Stanley & Co. was agent.

Fifth Third upsizes

Fifth Third priced an upsized $750 million of 6.25% senior global notes at 99.885 to yield 6.277% with a spread of Treasuries plus 332 basis points.

This was within price talk of 325 to 337.5 bps, a source close to the issue said.

The size was increased from $500 million.

"It was a good deal and oversubscribed," the source said. "The main variable was the company got the size done that they needed."

Credit Suisse Securities LLC, Goldman Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Inc. and Morgan Stanley were bookrunners.

Textron, Export bring deals

Textron Financial priced $300 million 5.4% five-year medium-term notes at 99.952 to yield 5.411% with a spread of Treasuries plus 245 bps.

Agents were Barclays, Deutsche Bank Securities Inc., HSBC Securities and Merrill Lynch.

Export Development priced $1 billion in 3.5% five-year bonds at 99.795 to yield 3.5445% with a spread of Treasuries plus 58.25 bps.

BNP Paribas Securities Corp., Morgan Stanley, RBC Capital Markets and The Toronto-Dominion Bank were bookrunners.

Great River upsizes

Great River priced an upsized $400 million 7.223% 30-year amortized first-mortgage bonds at par to yield 7.223% with a spread of Treasuries plus 275 bps.

The issue was increased from $350 million and priced via Rule 144A.

Banc of America Securities LLC, Goldman Sachs and J.P. Morgan were bookrunners.

Regions plans trust preferreds

An upcoming issue was announced Wednesday from Regions Financial Corp.

The company plans to issue trust preferred securities, with proceeds used for general corporate purposes.

Pricing will likely take place Thursday, a source close to the deal said.

Morgan Stanley, Citigroup, Merrill Lynch and Morgan Keegan & Co. are bookrunners.

Steady market draws issuers

The tone remained largely unchanged Wednesday, leaving room for more issuers to take advantage of the stability on Thursday.

"The markets are again in good shape," a source said. "I don't think there are many bank or broker names left [to issue] though."

The source noted that Tuesday was among, if not at the top, of record single-day issuance amounts with around $17.5 billion.

Another source said that although there may be some leftovers waiting to price this week, the market has likely seen the bulk of issues.

"It's been a constructive environment for issuers," he said. "Things were a touch wider today, but not enough to alter the tone."

Although Thursday won't be a large day for issuance, the week is not over, a source said.

"I think we'll definitely see more people, especially since they aren't being creamed with new issue premiums," he said.

New Xerox bonds firmer

A trader said that the new Xerox 5.65% notes due 2013, which had priced at a spread over comparable Treasury issues of 267 bps, came in by around 5 bps to 262 bps bid, 260 bps offered.

He did not see any actual activity in the 6.35% notes due 2018, which priced at a 262 bps spread, although he surmised that "they may have done a little better" with the same kind of 5 bps tightening.

Boeing bonds take off

Back among the established issues, Chicago-based jet manufacturer Boeing's 8.75% notes due 2021 tightened by more than 20 bps to the 115 bps level after the company reported first-quarter net income of $1.21 billion, or $1.62 per share, well up from $877 million, or $1.13 per share a year earlier. The earnings beat Wall Street's expectations of $1.35 per share in profit.

Revenues rose to $15.99 billion from $15.36 billion in 2007, although they did not meet analysts' projections of about $16.5 billion of revenues.

Ambac CDS costs widen out

Ambac Assurance Corp.'s credit-default swaps costs were seen having widened out massively after the parent company posted a huge quarterly loss due to more than $3 billion in charges connected with bad bets on mortgage securities.

The cost of protecting a holder of bonds against a possible default widened to 11% up front plus 500 bps annually, from previous levels about 700 bps annually with no upfront.

That followed the company's announcement that it had lost $1.66 billion, or $11.69 a share in the quarter, with an operating loss of $6.93 a share - several times the roughly $1.80 per share operating deficit Wall Street had been expecting.

Ambac's big loss and the consequent widening of its CDS costs as investors had less confidence in its ability to avoid a default, also dragged rival and sector peer MBIA Inc.'s debt-protection costs higher. They were quoted at 805 bps, a 90 bps widening from Tuesday's levels.

MBIA's 14% surplus notes due 2032 were meantime seen at 92 bid, 94 offered, down from 95 bid, 97 offered on Tuesday, with a trader noting MBIA and competitor Ambac's "horrible equity day" after release of the Ambac financials, "so the bonds would be lower."

Financial names seen easier

Ambac's bad news threw a black cloud over the financial sector; for instance, JP Morgan Chase & Co.'s 6% notes due 2018 - one of the most actively traded high-grade issues of the day - were seen to have widened by about 10 bps to the 164 bps level.

Morgan Stanley's 6.60% notes due 2012 were 15 bps wider at the 250 bps level.

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