ING Groep prices in stagnant new issue market; XTO bonds seen wider on merger news

By Andrea Heisinger

Omaha, June 10 - Those involved with the investment-grade bond market Tuesday hoped for a sign of the end to conditions that left few issuers brave enough to price anything.

ING Groep NV was one of the few issuers to enter the market with a somewhat sizable issue of perpetual capital securities that had been announced Monday.

Market conditions, not lack of supply, are leading to the stagnant level of new issues, a source said.

"It's not the kind of market people are wanting to step into," he said.

The secondary market was only marginally better Tuesday, with the pace picking up slightly over Monday's dismal level of trading.

"Today was a little more interesting," a secondary source said. "Yesterday was painful."

XTO eases on acquisition

Among the bonds some were watching were those from XTO Energy Inc., which announced it had entered into a definitive merger agreement with privately-held Hunt Petroleum Corp. and its entities for more than $4 billion.

XTO's bonds were "not making as big of move as you would have expected," a source said. They were about 5 to 10 basis points wider mid-afternoon Tuesday.

Another source said the company's 5.5% notes due 2018 were at 204 bps bid, 195 bps offered versus pricing of Treasuries plus 197 bps when they came to market on April 15.

ING upsizes

The issue from ING surprised some market sources, not for its pricing alone but because it was about the only game in town in terms of new issues for the day.

The company priced $1.75 billion of 8.5% perpetual capital securities, upsized from $300 million, at par of $25.

Citigroup Global Markets Inc., ING Financial Markets, Merrill Lynch, Pierce, Fenner & Smith Inc. and Morgan Stanley & Co., Inc. were bookrunners.

Secondary rebounds, weakens

The secondary market was weak at the open, rebounded slightly by midday and then closed wider, a source said.

"I would say we retraced half by the middle of the day, but then lost it all by the end of the day," he said. "Oil was slightly higher this morning."

Things could pick up slightly Wednesday, depending on the market open and if companies are still skittish about pricing under weaker conditions.

After predictions of a busy week have failed to live up to expectations, one source said there were a few people that were looking at the market, but then backed out.

"Things could pick up tomorrow depending on a few things," he said. "We're looking at a bit of a backlog at this point."

Things were slightly sunnier on the secondary side, although one source admitted it was "very, very quiet."

"Spreads in general were a little wider today," he said. "Buyers are kind of in hiding today."

Another source said he had traded a few things for the day, including some International Paper bonds that gave back some of Monday's gains.

Anheuser-Busch Cos., Inc. was another on that list, although he said the bonds continued to be lax, adding "there's not a lot of interest in Budweiser right now."

The source also said he traded some Weyerhaeuser Co. bonds.

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