Telecom Italia, International Paper, Cardinal Health, Nucor, Italy, AmEx price; market weakens at close

By Andrea Heisinger and Paul Deckelman

Omaha, May 28 - A solid market open Wednesday paved the way for names like Telecom Italia Capital, International Paper Co., Cardinal Health, Inc., Hubbell Inc., Nucor Corp., Cleco Power LLC, American Express Credit and the Republic of Italy to bring issues in for pricing.

By the end of the day conditions had soured slightly, which may affect the rest of the week's issuance, sources said.

"We didn't finish as strongly as we opened," a market source said. "We were a touch weaker to unchanged by the end of the day. It's not a red-hot market right now."

Another source called it a "very good open," saying that the European markets were firm overnight and the Treasury market is very stable.

The 10-year note was trading at exactly 4%, the source said, commenting that he had never seen it at that precise level before.

In the investment-grade secondary market Wednesday, advancing issues continued to trail decliners by a more-than four-to-three margin, while overall market activity, reflected in dollar volumes, was up more than 43% from Tuesday's pace.

Despite the greater number of decliners, spreads in general were seen continuing to have tightened as Treasury yields increased, with the yield on the benchmark 10-year issue, for instance, rising by 8 basis points to an even 4%.

Among newly issued bonds, traders saw a slight tightening in American Express paper, as well as that of Cardinal Health and Nucor.

Telecom Italia near low end

The trend of having a lot of issuers pricing smaller amounts is continuing, with most of

Wednesday's under the $1 billion mark.

Nonetheless, Telecom Italia priced $2 billion guaranteed senior notes in two tranches, each of them $1 billion.

The 6.999% 10-year notes priced at par to yield 6.999% with a spread of Treasuries plus 300 basis points.

This was at the tight end of price talk of 300 to 312.5 bps.

The 7.721% 30-year notes priced at par to yield 7.721% with a spread of Treasuries plus 305 bps.

This was on the tighter end of talk of 300 to 312.5 bps.

The issue went well, a source close to the deal said.

"We got down to the low end of talk, so it ended up being a good trade," he said.

Goldman Sachs & Co., J.P. Morgan Securities Inc., Lehman Brothers Inc. and Merrill Lynch, Pierce, Fenner & Smith Inc. were bookrunners.

International Paper brings $3 billion

International Paper priced $3 billion in three tranches.

The $1 billion of six-year notes priced at Treasuries plus 410 bps, with the $1.7 billion of 10-year notes pricing at Treasuries plus 395 bps.

The $300 million of 30-year notes priced at Treasuries plus 407.5 bps.

Banc of America Securities LLC, Deutsche Bank Securities, J.P. Morgan Securities Inc., RBS Greenwich Capital and UBS Investment Bank were bookrunners.

Nucor sells $1 billion

Steel company Nucor priced $1 billion in three tranches.

The $250 million of 5% five-year notes priced at 99.39 to yield 5.140% with a spread of Treasuries plus 180 bps.

The $500 million of 5.85% 10-year notes priced at 99.515 to yield 5.915% with a spread of Treasuries plus 190 bps.

The final tranche was a reopening of the company's 6.4% 30-year notes to add $250 million.

They priced at 97.466 to yield 6.596% with a spread of Treasuries plus 190 bps.

Total issuance for the notes is $650 million, including $400 million issued Dec. 3, 2007.

AmEx priced $1.75 billion of 5.875% five-year notes at 99.657 to yield 5.958% with a spread of Treasuries plus 262.5 bps.

Barclays Capital Inc., Citigroup Global Markets Inc., Credit Suisse Securities and RBS Greenwich Capital were bookrunners.

Italy brings sovereign

Italy priced $2.5 billion 3.5% three-year global notes at Treasuries plus 106 bps.

Goldman Sachs, J.P. Morgan and Merrill Lynch, Pierce, Fenner & Smith Inc. were bookrunners.

Cleco Power LLC priced $250 million 6.65% 10-year notes at 99.643 with a spread of Treasuries plus 250 bps.

Bank of New York, Calyon and KeyBanc Capital Markets ran the books.

Cardinal Health was another of the day's smaller issuers. They priced $300 million of 5.5% five-year notes at 99.637 to yield 5.585% with a spread of Treasuries plus 225 bps.

This was at the tight end of price talk of 225 to 230 bps.

Banc of America was bookrunner.

Rentenbank on tap

An issue from Germany's Rentenbank was announced Wednesday, but a source said it did not price.

The company is planning to issue five-year notes, according to a Securities and Exchange Commission filing.

Goldman Sachs, RBC Capital Markets and RBS Greenwich Capital were bookrunners.

There will be more names coming into the market tomorrow, with issuance perhaps less than Wednesday, sources said.

"I think we have a couple of trades looking at tomorrow, but today's close might prevent people from coming in," a market source said.

New issues tighten, a little

A trader saw American Express Credit's new 5.875% notes due 2013, which priced at a spread over comparable Treasury issues of 262.5 bps, as having firmed a little to 260 bps bid, 250 bps offered.

A trader saw Nucor's new 10-year notes trading at 185 bps bid, 183 bps offered, while its newly re-opened 30-year issue was at 187 bps bid, 185 bps offered, both in slightly from their spread at pricing of 190 bps. He did not see any trading going on in the company's new five-year notes, which priced at 180 bps over Treasuries.

The trader also quoted Cardinal Health's new 5.50% notes due 2013 as being offered at 215 bps, although he qualified that with the caveat that the one-sided level "doesn't necessarily mean that's where it truly is."

He saw no trading in Cleco Power's 6.65% notes due 2018, or the three-tranche issue from International Paper.

Recent issues a mixed bag

Among recently priced issues, Pepsico Inc.'s 5% notes due 2018 were seen continuing to trade well in from their issue price, quoted at 100 bps over, versus the 125 bps level at which the soft-drink and snack-food giant priced its $1.75 billion of new bonds on May 19. Keycorp's 6.5% notes due 2013 traded at 328 bps over, versus the 350 bps level at which its $750 million of bonds priced on May 9.

However, other recent issues traded within a few bps of issue, including GlaxoSmithKline Capital Inc.'s 5.65% notes due 2018, quoted at 178 bps over, versus the 173 bps level at which the drugmaker's $2.75 billion of 10-years priced on May 6, along with companion five-year and 30-year issues. Genworth Financial Inc.'s 6.515% notes due 2018 were seen at 269 bps off Treasuries; the insurance company's $600 million of notes priced at 265 bps over on May 19.

Comcast Corp.'s 6.40% bonds due 2038 were seen at 210 bps over Treasury, well outside the 185 bps level at which the cable company's $1 billion of bonds, along with a companion 10-year issue, priced on May 2.

Gannett slumps as rating is cut

Among the more established bonds, one of the most actively traded issues on the day was Gannett Co.'s 5.75% notes due 2011.

A market source saw those bonds widen out all the way to 433 bps in round-lot dealings from prior levels of about 317 bps; on a dollar-price basis, the bonds were quoted down more than 3 points at the end of the day to just under 97, from prior levels north of par.

The slide coincided with Wednesday's announcement from Standard & Poor's that it had cut the newspaper company's corporate credit rating and senior unsecured debt rating to BBB+ from A- previously, and assigned a negative outlook to Gannett debt, suggesting the rating could fall further.

Up until now, Gannett - with a debt load considerably lighter than most of its sector rivals - had managed to maintained top credit ratings, while the bonds of other newspaper companies like Tribune Co. or McClatchy fell into junk territory or teetered on its edge. The downgrade is seen by observers as further proof that the newspaper industry slump is severe enough to now affect the credit ratings of even heretofore highly-regarded publishers like Gannett.

S&P analyst Emile Couurtney said in the downgrade message that the agency's move "reflects a worsening pace of decline in year-over-year advertising revenue at the company's newspaper publications so far in 2008.

"The slowing U.S. economy will likely continue to exacerbate operating weakness at Gannett, and this comes at a time when the company and the newspaper industry in general have experienced prolonged operating weakness due to a secular shift in revenue away from print advertising," Courtney added.

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