New issue activity remains light; JPMorgan brings $3.5 billion; Lehman gains on earnings

By Paul Deckelman and Sheri Kasprzak

New York, Dec. 13 - New deal action was rather light on Thursday as the week wound down, market sources said, with the exception of the pricing of two tranches of senior notes from JPMorgan Chase & Co.

The larger of the two tranches was $3 billion in 6% notes (Aa2/AA-/AA-). Those notes priced at 99.814, with a spread of Treasuries plus 185 basis points on Thursday.

The notes are due January 2018.

J.P. Morgan Securities is the bookrunner with BB&T Capital Markets, Cabrera Capital Markets and Wells Fargo Securities as the co-managers.

A smaller tranche from JPMorgan - this one for $500 million (Aa2/AA-/AA-) - also priced Thursday.

This add-on to the 5.375% notes due October 2012 was priced at 100.972 with a spread of Treasuries plus 160 basis points. The notes have a yield to maturity of 5.141%.

J.P. Morgan is the bookrunner with Deutsche Bank and Cabrera as the co-managers.

In a broader sense, a market source said Thursday that the pickings for new issues seem to be pretty slim at this late stage of the week.

"I'm drawing a blank here," said the market source Thursday morning. "I'm not really seeing anything coming up today or tomorrow."

News that Lehman Brothers' fiscal fourth-quarter earnings came in better than expected, despite the ravages of the credit crunch and its impact on financial institutions, sent the company's bonds higher Friday, market participants said.

Also in the financial sector, the big new deal from JP Morgan was seen having tightened a little - but the equally big new deal from American General widened out when it moved into secondary. Outside of the financials, the new John Deere deal was trading better.

JPMorgan 10-years narrow

When the new JP Morgan 10-year notes were freed for secondary dealings, a trader said, the bonds, which had priced at a spread of 185 basis points over comparable Treasuries, narrowed slightly to levels around 183 bps bid, 179 bps offered.

He saw the new American General 6.9% notes due 2017, which had priced at 290 bps over on Wednesday, start off the day on a firmer note at 287 bps bid, 290 bps offered - but later on in the session, they had given all of those gains back and then some, moving out to a bid of 294 bps over. They ended up around 293 bps, he said.

Also on the new-deal front, another trader saw the new John Deere 4.95% notes due 2012 trading at 143 bps bid, 132 bps offered, having firmed from the 147 bps at which they had priced Wednesday.

"Spreads were better, he said. "People want to put money to work."

But he said that the non-financial industrial were generally pretty quiet, "really nothing" was going on.

Despite a fair amount of trading volume in Pepsico's 4.65% notes due 2013, he said that they were still in a 111-110ish context, pretty much unchanged on the day and actually a bit better than the 115 bps seen a couple of days earlier, apparently not much affected by lowered 2008 guidance from Pepsi Bottling Group, a major local bottler for the soda giant. However, another market source was quoting the Pepsi bonds at 119 bps during the afternoon.

Lehman better

A market source saw Lehman's 5¾% notes due 2017 having tightened about 5 bps to 245 bps bid, 250 bps offered, apparently pushed up by investor response to the quarterly numbers.

Lehman posted earnings of $1.54 per share, about 10 or 12 cents better than Wall Street was looking for. While revenues were down 3.2% year over year to $4.39 billion, that still beat market expectations of $4.26 billion.

Another market source saw Lehman's 6 7/8% notes due 2037 having tightened about 5 bps from Wednesday's close to 249 bps over.

Among other financial names, Washington Mutual continued to improve following the company announcement earlier in the week of measures it was taking to turn its fortunes around, including a huge $3 billion convertibles sale to pump up its liquidity.

WaMu's 7¼% notes due 2017 were quoted having tightened by 10 bps to 490 bps.

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