Wal-Mart, Barclays, Pacific Life price; tightening spreads could bring more issuers; Wal-Mart up in trading

By Andrea Heisinger and Paul Deckelman

Omaha, April 8 - A strong day in the investment-grade market brought out new issues from Wal-Mart Stores Inc., Barclays Bank plc and Pacific Life Global Funding.

In the investment-grade secondary market Tuesday, advancing issues led decliners by a better than five-to-four margin, while overall market activity, reflected in dollar volumes, jumped by 25% from Monday's pace.

There was neither a general widening nor a tightening trend in spreads, which were mixed, as were the movement of Treasury yields; while the two-year government note's yield, for instance, tightened by 7 basis points to 1.85%, the yield on the benchmark 10-year issue moved out by 2 bps to 3.56%.

Wal-Mart Stores' big new deal took center stage in the secondary market, with the new bonds tightening solidly after their pricing.

Washington Mutual Inc.'s bonds also tightened, buoyed by the news that the troubled thrift will be getting a $7 billion cash infusion; market players apparently paid less attention to its predictions of a $1 billion-plus quarterly loss and a massive loan-loss writedown.

But WaMu's credit-default swap spread, which had tightened markedly on Monday on reports of the coming cash infusion, gave back some of those gains Tuesday.

Wal-Mart prices at tight end

There was no particular reason the Wal-Mart issue came into the market Tuesday, a source close to the deal said. Things were stable, and the company simply picked the day, he said.

The discount retailer priced $2.5 billion in five and 30-year tranches.

The $1 billion 4.25% five-year notes priced at 99.759 to yield 4.304% with a spread of Treasuries plus 160 bps.

The $1.5 billion 6.2% 30-year notes priced at 99.703 to yield 6.222% with a spread of Treasuries plus 188 bps.

Both tranches came in on the tight end of price talk, a source said. The five-year tranche was talked at 162.5 bps area and the 30-year tranche at 190 bps area.

Citigroup Global Markets Inc., Credit Suisse Securities LLC, Goldman Sachs & Co. and RBS Greenwich Capital were bookrunners.

The issue went well and, due to high demand, was oversubscribed four to five times, a source close to the deal said.

Barclays, Pacific Life sell deals

Barclays priced $2.5 billion in 8.125% perpetual preference shares at par of $25. The non-cumulative callable shares are non-callable for five years.

Barclays Capital Inc., Citigroup, Merrill Lynch, Pierce, Fenner & Smith Inc., UBS Investment Bank and Wachovia Capital Securities LLC were bookrunners.

Pacific Life priced an upsized $500 million of notes via Rule 144A. The size was increased from $400 million.

The subsidiary of insurance company Pacific Life priced 5.15% five-year notes at 99.952 to yield 5.161% with a spread of Treasuries plus 247 bps.

Barclays and UBS were bookrunners.

Kospo could price Thursday

An issue from Korean Southern Power is still on a road show, but may price as early as Thursday, a source said.

If the market remains stable, there could be price talk announced Wednesday, with pricing Thursday when the road show ends, he said.

Wal-Mart could pave way

"The market is in very good shape right now," a source said. "I think people are trying to round up guys that were sensitive to conditions before and get them into the market."

Based on the success of the Wal-Mart deal, there could be a number of deals Wednesday.

Supply is not robust, but that doesn't mean there aren't potential issuers out there, a source said.

"I don't think there are a lot waiting in the wings, but a lot out there see this as an opportunity," he said. "Spreads are tightening and if Wal-Mart is successful, we'll definitely see more."

Another market source was more cautious, saying it's still a stable market despite a somewhat rough open Tuesday that improved throughout the day.

It's possible the Wal-Mart deal could encourage others to issue Wednesday, he said.

New Wal-Marts firm smartly

A trader said the new Wal-Mart 4.25% notes due 2013, which had priced earlier in the session at a spread of 160 bps over comparable Treasuries, had come in to 147 bps bid, 145 bps offered by late afternoon. He also saw its new 6.20% notes due 2038 having tightened to 171 bps bid, 169 bps offered from their 188 bps spread at pricing.

"Both bonds tightened considerably," he declared.

Wal-Mart's already established bonds were seen following the same trend. The trader saw the store giant's 4 1/8% notes due 2011 tightened about 10 bps to 85 bps bid, while its 5 3/8% notes due 2017 were about 5 bps tighter at 145 bps bid.

Not too much else seemed to be going on, he said. "Wal-Mart seems to be dominating the market right now. It seems like there are a lot of buyers for that paper, and that's knocked everything [else] to the back page."

Washington Mutual tightens up...

The news that Washington Mutual will be getting a $7 billion cash infusion gave the Seattle-based Number-One U.S. thrift's bonds a big lift.

A market source saw its 4.20% notes due 2010 at 711 bps over, well in from 975 bps over at the start of the week, while its 8.25% notes due 2010 narrowed sharply over the past two sessions to 785 bps over from a 1,238 bps spread previously.

Its 5.55% notes due 2010 tightened to 653 bps over. Quoting the troubled company's bonds on a dollar-price basis, a market source called the 5.55s up more than 2 points on the session at the 94.5 level, while its 8.25% notes due 2010 rose almost a point to 97. Another source called its 7¼% notes due 2017 1½ points better at 85.5 bid.

To raise the $7 billion, WaMu sold about 176 million shares at $8.75 each, for gross proceeds of $1.54 billion, as well as $5.5 billion of convertible preferred shares with an initial conversion price of $8.75.

However, even with that big cash infusion from an investment vehicle managed by Texas Pacific Group and other institutional investors, including many top shareholders, Standard & Poor's is keeping the company's ratings under scrutiny for a possible downgrade.

S&P noted that WaMu's residential mortgage portfolio with a 50% concentration in California, "combined with continued recessionary pressures in the broader economy, will keep credit-related expenses at record highs."

...but WaMu CDS widen out

Investors in the credit-default swaps market, meantime were equally wary. On Monday, when news of the impending big cash infusion - then only estimated at $5 billion - had first surfaced, WaMu's debt-protection cost had narrowed by 60 bps to 295 bps bid, 315 bps offered.

But a trader on Tuesday saw half of those gains surrendered, with the cost of insuring WaMu debt having moved back up by 30 bps to 325 bps bid, 345 bps offered.

In line with a financial sector easing on Tuesday, other financials names' CDS spreads were also seen having widened out around 10 or 15 bps, with Bear Stearns at 122 bps bid, 130 bps offered, Lehman Brothers Holdings at 168 bps bid, 173 bps offered, Merrill Lynch at 165 bps bid, 173 bps offered, and Morgan Stanley at 146 bps bid, 154 bps offered.

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