Week's new deals top $26 billion; J.P. Morgan, Standard Chartered price, HCC pulls; financials up again

By Andrea Heisinger and Paul Deckelman

Omaha, Sept. 21 - The week started quiet and ended the same way with few new issues Friday and one that was expected to price and was instead withdrawn.

Issues for the week totaled more than $26 billion.

"It was a pretty solid day, a standard day in the market," one trader said.

J.P. Morgan Chase Capital XXV priced $1.5 billion in 6.8% 30-year capital securities at 99.416 to yield 6.846%, at a spread of Treasuries plus 195 basis points.

Standard Chartered Bank priced $1 billion in 6.4% 10-year lower tier two notes at 99.781 to yield 6.43%, at a spread of Treasuries plus 180 bps.

A planned issue of $300 million in 10-year senior notes from HCC Insurance Holdings Inc. was withdrawn due to market conditions, according to a press release from the company.

The action will not affect the redemption of the company's 2% convertibles or ongoing operations, the release said.

"It seems like there was something else going on there," one market source said. "There's no reason someone shouldn't be able to price a deal post-Fed."

The investment-grade secondary market was seen generally stronger on Friday, with advancing issues estimated to have outpaced decliners by slightly less than a 3-2 ratio.

As has been the case the whole week, in the wake of the big Federal Reserve rate cut on Tuesday, the financial issues remained the focus for many traders. J.P. Morgan became the latest such issuer to take advantage of positive market conditions and bring a big new deal to market, and those bonds were heard to have subsequently tightened. Both tranches of the huge Lehman Brothers 2-part deal that priced earlier in the week once again tightened substantially. Bad news out of HSBC Holdings had no impact on the company's bonds.

Outside of the financials, Alcoa Inc.'s bonds were active, as were rival tobacco heavyweights Reynolds American and Altria Group.

Returning to the primary, most of the week's more than $25 billion in new issues priced during two days.

Monday and Tuesday were at a virtual standstill while prospective issuers waited to see what the Federal Reserve would do with it interest rates, sources said. The central bank dropped its key rates by 50 basis points instead of the widely expected 25, leading to a flood of new issues Wednesday and Thursday.

Several were over the $1 billion mark, including many financial institutions.

Lehman Brothers Holdings priced $3.25 billion in seven and 20-year notes, while General Electric Capital Corp. issued $3 billion in 10-year global floaters.

JPMorgan Chase & Co. had two different issues totaling $4 billion. They priced $3 billion in 10-year notes and $1 billion in three-year floaters.

Barclays Bank plc also had more than one issue, with $1.25 billion in hybrid perpetual securities and $700 million in two-year global floaters.

The Royal Bank of Scotland Group plc priced $1.45 billion, or 58 million shares, in preferred stock and Swedish Export Credit Corp. priced $1.25 billion in three-year notes.

Iceland's Glitnir Banki HF sold $1 billion in five-year notes, upsized from $500 million.

Marathon Oil Corp. priced $1.5 billion in 10 and 30-year notes and Tyco Electronics Group SA priced $2.05 billion in five, 10 and 30-year notes.

Other issuers for the week came from a mixed bag of companies.

San Diego Gas & Electric priced $250 million in 30-year notes and Rockies Express Pipeline LLC sold $600 million in two-year floaters.

Canadian National Railway Co. priced $550 million in 10 and 30-year notes, Weyerhaeuser Co. sold $450 million in two-year floaters and Southwest Airlines Co. priced $500 million in Class A and B pass through certificates.

Liberty Property LP sold $300 million in 10-year senior notes and Avery Dennison Corp. issued $250 million in 10-year notes.

Suncor Energy Inc. priced $400 million in notes due 2038, John Deere Capital Corp. had $750 million in one-year floaters and Great Plains Energy Inc. sold $100 million in 10-year floaters.

Another financial, Bank of America Corp., came to the market and sold $550 million of preferred stock.

This week's issuance exceeded last week's total of more than $22 billion.

New issues so far for September are more than $65 billion.

A backlog of issues held over from the week just completed and stretching back to the last couple of months of unstable market conditions could hit next week.

"There's probably a fair amount of supply backed up pre-Fed," a market source said. "Next week should be busy."

New JP Morgan notes tighten in trading

When the new JP Morgan 6.80% capital securities due 2037 began trading in the aftermarket, a trader said, they began firming. He saw them trading in a context of "192, 190, 191, 189 over," versus the 195 bps spread at which the securities had originally priced, "so it's creeping a little bit tighter here."

He said that the new mega-deal - which followed pricings earlier in the week from JP Morgan itself and the likes of Lehman, GE Capital and Barclay's Bank - "seemed to be the most focus."

Mid-week Lehman deal still tightening

However, players also continued to take those other recently priced deals higher, and none more so than Lehman's $3.25 billion two-part behemoth, which priced on Wednesday and at that time immediately began tightening. That upside push continued solidly on Thursday, and then continued again on Friday.

He saw the new Lehman 7% bonds due 2027 "another 5 to 10 bps tighter than [Thursday], so they are trading inside of 200 [bps.]" The $1 billion of bonds priced Wednesday at 220 bps, though the paper began firming the moment it began secondary dealings, ending that initial session at 213 bps. On Thursday, it continued to come in, to about 200 bps over, and the spread tightening continued anew on Friday.

The other part of that Lehman deal, the $225 million of 6.20% notes due 2014, initially priced Wednesday at 190 bps off Treasuries. They tightened down to 185 bps in initial public trading, continued to tighten Thursday to around 175 bps, and came in Friday to a 165/160 bps context, "another 5 to 10 [bps] tighter."

HSBC unaffected by subprime move

Elsewhere, the trader said that the news that British banking giant HSBC will close its Decisions One Mortgage subprime lending subsidiary in the United States and take a goodwill charge of around $880 million as a result had no impact on the company's many series of existing bonds. "Not at all," he said, noting that company executives had said that the impact would be immaterial."

HSBC said that the subprime operation was "no longer sustainable." Besides the goodwill charge, it will also take a $65 million restructuring charge in connection with the move. The charges will be taken by the end of the year.

Company chairman Michael Geoghegan said that the subprime operation was only "a small part of our U.S. business."

Apart from the financial names, a market source indicated that Pittsburgh-based aluminum producer Alcoa's bonds, such as its 5.9% notes due 2027, were notably better. Another gainer was International Business Machines Corp.

One of the most actively traded issues was Reynolds American's split-rated 7¼% notes due 2013, which moved slightly to the downside. Rival Altria's bonds, meantime, were seen better on the day.

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