Dexia, Valspar, Pacific Life price; Continental, HSBC USA plan sales; Telecom Italia gains

By Andrea Heisinger and Paul Deckelman

New York, June 16 - Tuesday's sales were more varied than the previous day's with Dexia Credit Local, Valspar Corp. and Pacific Life Insurance Co. each selling bonds, mostly via Rule 144A.

Sales from HSBC USA Inc. and Continental Airlines, Inc. were announced, although both stray from the strict regimen of senior and government-backed notes the primary has seen lately. Continental plans to price pass-through certificates.

The tone improved slightly from the weakness in both the primary and secondary markets seen the previous day.

But it is unlikely that it improved enough to kick-start a surge of issuance for Wednesday, a syndicate source said.

"It's definitely slower now," he said.

Among the established issues in the secondary arena on Tuesday, a market source said the CDX Series 12 North American high-grade index widened by 7 basis points to a mid bid-asked spread level of 136 bps.

Advancing issues - which on Monday had held a three-to-two edge over decliners - maintained that commanding lead on Tuesday.

Overall market activity, reflected in dollar volumes, was up nearly 50% from Monday's levels.

Spreads in general were seen a wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year issue fell by 6 bps 3.65%.

Trading in new or recently priced issues remained a key focus of the secondary market, although movement in Tuesday's new Valspar notes was very limited. A syndicate source commented on the tone being "a bit heavy in Secondaryland."

Monday's offerings, such as Deutsche Telekom International Finance BV and Comcast Corp., were meantime trading no better than at, or even wider than their respective issue levels

But the new Telecom Italia Capital bonds were quoted offered at substantially tighter levels than those at which they had priced, although no two-sided markets were observed.

Dexia offers two tranches

Belgium-based Dexia Credit Local, a unit of development bank Dexia Group, sold $4 billion of senior notes in two tranches with the guarantee of the governments of France, Luxembourg and Belgium.

A $2 billion tranche of two-year floating-rate notes priced at par to yield three-month Libor plus 65 bps, while $2 billion of 2.375% notes due 2011 sold at Treasuries plus 124.2 bps.

The deal was done via Rule 144A. A source close to the deal said there was not anything especially interesting about the sale.

A source away from it was interested that it was not rated AAA, and that the sale had the backing of not one but three governments. Moody's Investors Service gave the notes a Aa1 rating while Standard & Poor's and Fitch both assessed it at AA+.

"That's a little surprising," he said.

Banc of America Securities, Citigroup Global Markets, Deutsche Bank Securities and Morgan Stanley & Co. ran the books.

The bank for regional sustainability is based in Brussels.

Valspar deal upsized

Valspar, the paint and coatings maker, priced $300 million of 7.25% 10-year senior notes at Treasuries plus 362.5 bps, an informed source said.

The size was increased from $250 million, he added. It came at the tight end of guidance in the 375 bps area, with a margin of plus or minus 12.5 bps, he said. It was launched at its pricing level of 362.5 bps.

Bookrunners were Banc of America Securities, Goldman Sachs & Co. and Wachovia Capital Markets.

Proceeds are being used by the Minneapolis-based company to repay a portion of commercial paper borrowings and other debt under existing bank credit facilities.

Pacific Life prices surplus notes

Pacific Life Insurance sold $1 billion of 9.25% 30-year surplus notes at Treasuries plus 475 basis points, an informed source said. The deal was done via Rule 144A.

Bookrunners were Goldman Sachs & Co., UBS Investment Bank and Wachovia Capital Markets.

The insurance and financial services company is based in Newport Beach, Calif.

Tone up as market diversifies

Market sources continued to marvel at the oddity of Monday's deals all coming from telecommunications names.

"Yeah, what are the chances?" a source said. "That was pretty weird."

A syndicate source said the tone of the market had improved, if only slightly, from the previous day.

"It's definitely better," he said, comparing the tone to Monday's. "It's still softer than what we've seen in the past weeks."

This depression of the tone wasn't restricted to the primary, he said, adding that the secondary market was also not in top form.

Issuance is not expected to pick up much for the remainder of the week.

"I'm hearing away that we may have a couple of things," the syndicate source said. "I think whatever comes tomorrow will be about it."

HSBC unit to sell income notes

HSBC USA is set to price two tranches of income notes Wednesday, both with two-year maturities and prices of par to yield three-month Libor plus 110 bps.

On sale are offerings of $280 million and $276 million, according to FWP Securities and Exchange Commission filings. They were initially listed as being priced Tuesday, but amended filings followed, with the pricing date as Wednesday.

They each have a coupon floor of 1%.

Bookrunner is HSBC Securities.

The branch of financial services company HSBC is based in London.

Continental to sell pass-throughs

Houston-based Continental Airlines is planning to price $389.687 million class A pass-through certificates due 2018, according to a 424B3 Securities and Exchange Commission filing.

The certificates will be priced at par and have an initial average life of 5.9 years.

Morgan Stanley & Co., Goldman Sachs & Co. and Calyon Securities are bookrunners.

Proceeds will be used to finance the purchase of five new aircraft and refinance 12 others bought between 1998 and 1999.

New Valspar bonds tighten slightly

When the new Valspar 7.25% notes due 2019 were freed for secondary dealings, a trader observed the Minneapolis-based paint manufacturer's $300 million of paper - upsized from $250 million originally - had narrowed a little to a spread over comparable Treasury issues of 357 bps bid, 352 bps offered.

The bonds had priced earlier in the session at 362.5 bps over

Recent issues a mixed bag

Among Monday's issues, Telcom Italia's bonds were being quoted having tightened solidly, at least on the offered side.

A trader saw its $1 billion of 6.175% notes due 2014 offered at 300 bps over, versus the 345 bps level at which the bonds had priced on Monday, although he didn't have a two-sided market.

And he saw its $1 billion of 7.175% notes due 2019, which had also priced at 345 bps over, offered at 332 bps, with no bid seen.

However, Monday's other offerings either went nowhere or actually widened out.

A trader saw Comcast's $700 million of 5.l7% notes due 2019 at 205 bps bid, 202 bps offered, versus the 200 bps level at which the Philadelphia-based cable-TV giant's bonds had priced on Monday.

Its $800 million of 6.55% bonds due 2039, which had also priced at 200 bps over, were offered at 201 bps, but with no bid-side seen.

Deutsche Telekom's $750 million of 4.875% notes due 2014 widened to a bid level of 228 bps over, though with no offered levels seen. The bonds had priced on Monday at 225 bps over.

Its $750 million of 6% notes due 2019 were seen at 252 bps bid, 242 bps offered, having widened out from 237.5 bps at the pricing.

Recent financials trade actively

A market source saw some busy activity in several recently priced financial names. Citigroup Inc.'s 8½% notes due 2019 were being quoted bid at 451 bps over comparable Treasuries, wider by 38 bps from Monday's spread levels.

However, the New York-based banking giant's issue remained well in from the 562.5 bps level at which those bonds had priced on May 15.

Also on the downside was Bank of America Corp.'s 7.375% notes due 2014, at 358 bps bid. That was 13 bps wider than Monday's levels, although the Charlotte, N.C.-based banking behemoth's bonds were markedly tighter than the 587.5 bps level at which that $3 billion of bonds had been priced back on May 8.

Dell seen down

A market source saw Dell Inc.'s 5.875% notes due 2019 at 195 bps bid - 32 bps wider than Monday's close, and unchanged from the level at which that $600 million of bonds priced on June 10 as part of a two-part, $1 billion mega-deal.

Bank, broker CDS costs rise

A trader who tracks the credit-default swaps market said that the cost of protecting a holder of big-bank paper against a possible event of default rose by anywhere from 5 bps to 45 bps, depending on the underlying credit involved.

He also saw investment bank/brokerage institutions' CDS costs rising by 10 bps to 30 bps.

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