DuPont sells $2 billion notes; IBM prices $1 billion in floaters; both gain in trading

By Paul Deckelman and Sheri Kasprzak

New York, July 23 - New issue action picked up somewhat in the investment-grade debt market on Wednesday as E.I. du Pont Nemours and Co. and IBM Corp. priced new notes.

In the investment-grade secondary market Wednesday, advancing issues trailed decliners by a five-to-four ratio, while overall market activity, reflected in dollar volumes, was up 17.5% from Tuesday's pace.

Spreads in general showed were seen steady, in line with relatively stable Treasury yields; for instance, the yield on the benchmark 10-year issue rose by 1 basis point to 4.12%.

A slight modest tightening was seen in the new bonds priced Wednesday by Du Pont and IBM.

Du Pont sells two-parter

The du Pont notes (A2/A/A) priced in two tranches - one for $750 million and the other for $1.25 billion.

The $750 million in 5% notes priced with a 168 basis points spread. They came at 99.008 to yield 5.23%. The $1.25 billion in 6% notes came with a 185 bps spread, pricing at 99.958 to yield 6.006%.

The 5% notes are due July 15, 2013 and the 6% notes are due July 15, 2018.

Goldman, Sachs & Co.; Credit Suisse; Morgan Stanley; Banc of America Securities; JPMorgan; and RBS Greenwich Capital were the joint bookrunners for the notes.

Proceeds will be used for general corporate purposes.

IBM sells $1 billion

In other pricing news Wednesday, IBM Corp. brought $1 billion in three-year floating-rate notes.

The notes (A1/A+/A+) have a coupon of Libor plus 58 basis points, priced at par and are due July 28, 2011.

Barclays Capital and Merrill Lynch were the joint bookrunners for the sale.

The company plans to use the proceeds for general corporate purposes.

New DuPonts firm slightly

A trader said that the new Du Pont 5% notes due 2013 were trading at 165 bps bid, 162 bps offered, versus the spread over comparable Treasuries of 168 bps at which the Wilmington, Del.-based chemicals giant priced $750 million of the bonds earlier.

He also saw the new Du Pont 6% notes due 2018 tighten a little to 184 bps bid, 181 bps offered, versus the 185 bps level at which the company priced $1.25 billion of those notes earlier

IBM floaters come in

The trader also heard that IBM's new $1 billion floating-rate issue due 2011, which priced with an initial yield of 58 bps over the three-month Libor rate, was being bid at 55 bps over.

The trader said that "spreads are better in general."

Walgreen bonds do well

He also noted that the new Walgreen Co. 4.875% notes due 2013 were trading around 161 bps bid, 158 bps offered.

That's in from the 175 bps over level at which the Deerfield, Ill.-based operator of the top U.S. pharmacy chain priced $1.3 billion of the bonds back on July 14.

"Initially, those things didn't even tighten," he said, "and then all of a sudden they came screamin' in."

He noted that Walgreen's status as a "new name," as well as being a big, liquid issue from a well-regarded credit, helped push the bonds up.

A market source at another desk saw the new Walgreen bonds trading at 163 bps over, slightly wider than the bid levels in the high 150s and low 160s it's been seen at over the past few sessions, but still well in from its issue price.

XTO Energy bounces back

Elsewhere, a market source saw XTO Energy Inc.'s bonds firmer, as they bounced back from a downturn seen on Tuesday after the Fort Worth, Tex.-based independent oil and gas exploration and production company announced some $2 billion of recent acquisitions in the oil shale fields of Louisiana, Arkansas and northern Texas, including its latest purchase, $800 million for 12,900 acres next to its existing Barnett Shale operations. XTO at that time also announced at that time that it had increased its 2008 budget for development and exploration spending to $3.5 billion from $3 billion, and also added another $100 million to a planned $500 million in spending on construction of pipeline infrastructure, compression and processing facilities.

Concern about how the company might fund all of this caused the bonds to widen on Tuesday - but they snapped back Wednesday as the company announced that it would raise some $1.25 billion by selling 26 million shares of stock at $48 per share.

With that reassuring news, as well as the favorable quarterly earnings also announced Tuesday, bonds like XTO's 4 5/8% notes due 2013 were seen having tightened by 30 bps to around the 220 bps mark.

Earnings feed McDonald's rise

Positive earnings also helped give a boost to McDonald's Corp. paper, with its 6.30% bonds due 2037 about 15 bps tighter on the day at 165 bps over.

The Oak Brook, Ill.-based fast-food behemoth said it earned $1.19 billion in the second quarter, including a gain from the sale of its stake in sandwich chain Pret A Manger - a sharp turnaround from its year-earlier loss of $711.7 million stemming from charges on the sale of its Latin America and Caribbean businesses. The latest results also solidly beat Wall Street estimates.

CDS swaps tighten

In the credit-default swaps market, a trader saw debt-protection costs for big banks 5 bps to 25 bps tighter, while major brokerage CDS costs were 5 bps to 10 bps tighter, a sign of increased investor confidence in the sector.

Even Washington Mutual Inc.'s debt-protection costs were 5 bps tighter he said - despite the $3.3 billion loss the big thrift reported Tuesday - at 720 bps.

WaMu bonds off

However, traders saw WaMu's bonds - which had actually notched some gains late Tuesday despite the news of the big quarterly loss - giving up those gains as investors apparently looked past management's assertions about the company's strong capital and liquidity position to focus on the sheer amount of red ink it generated in the latest quarter.

Matters were not helped by Standard & Poor's announcement that it was cutting its ratings on Seattle-based WaMu, the nation's largest savings institution, down to BBB-, just one thin notch above junk level.

A junk bond trader said that "the financials were getting ahead of themselves," and quoted WaMu's 4 5/8% notes due 2014 at 58 bid, down from late-Tuesday levels between 59.5 and 61.

Another trader said he saw those bonds at 61, down from 62 late Tuesday, but said that he "really didn't see a lot of dumping of the securities."

He saw WaMu's 8¼% notes due 2010 go as low as 78 during the session before finishing at 80.25, which he called unchanged. He saw "lots of odd-lot trading" in that particular issue.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.