AmEx Credit prices surprise issue, ends week of $15 billion new deals; secondary quiet, volume light

By Andrea Heisinger

New York, Aug. 15 - The week came to a close with a surprise issue from American Express Credit Corp., closing out a week of more than $15 billion in investment-grade deals.

Sources said that it was the timing and not the size that was surprising.

"It was a little bit of a surprise given the last couple of days," one source said. "It just goes to show that if someone needs to get a deal done they'll do it. Even on Friday."

The secondary market was "very quiet," to end the week, a source said.

With not many investment-grade-rated companies releasing earnings and many market players on vacation, it was a downturn in volume from previous days.

AmEx Credit prices $2 billion

The credit arm of American Express priced $2 billion in five-year notes on a day when any issuance was unexpected.

The 7.3% notes priced at 99.835 to yield 7.34% with a spread of Treasuries plus 425 basis points.

They priced in line with guidance of the 425 bps area, a source close to the deal said.

It was a cut and dried issue, the source added.

Banc of America Securities LLC, Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and UBS Investment Bank ran the books.

The issue comes two days after analysts predicted a downturn in third quarter earnings from the credit card company.

"I think it [the issue] was a surprise to a lot of people," a source said. "But you've got a lot of consumers facing financial problems and a worsening economy. These companies like American Express and Discover are more imperiled."

American Express has debt coming due and are "trying to keep their capital budget sheet functional," the source said.

The company also could have used more size, he added, with the company used to printing more at the $3 billion level.

Week's issues total $15 billion

New issues for the week came in around $15.035 billion, aided by large deals from financial names.

This was an increase from the previous week's total of nearly $10 billion.

The next couple of weeks should see moderate issue amounts, a source said, as companies and investors wait until post-Labor Day to do business.

This week's issues didn't really diminish any backlog that has built up.

"There's still a fair amount of supply out there," he said. "Most people are optimistically eying September. They're waiting until the Street is focused and there's the post-Labor Day window."

This is assuming market conditions are good after the holiday, he added.

Coming week seen slow

The next week or two will likely see only moderate issuance, based on the company and investor holdouts until after Labor Day.

"I think everyone's got one to two deals they want to print, but it's hard to convince the companies to get them out," a source said. "A lot of investors are on vacation, and desks are bare bones right now."

There aren't any strategic deals expected, the source said, but that doesn't mean a company or financial doesn't have one up its sleeve.

JCPenney bonds unchanged by earnings

JCPenney Co. Inc. bonds were seen "unchanged in very light volume" Friday on news that the retailer's earnings fell in the second quarter, a secondary source said.

The company reported Friday that its quarterly profit fell 36% due to the economic pinch consumers are feeling.

Net income was reported at $117 million, down sharply from the $182 million of a year ago.

The company is also predicting a third quarter decline in earnings.

AmEx parent tops in volume

The parent company to American Express Credit, which priced an issue Friday, was seen at the top of the list for high-grade bond volume.

The company's 4.75% notes due 2009 were seen at 185 bps over Treasuries.

There were no issuers that stuck out, either in movement or volume, in the secondary Friday, a source said.

"I think everybody's already gone for the weekend," he said mid afternoon.

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