National Australia Bank, Panhandle Eastern price; American Financial postpones; market bounces back

By Andrea Heisinger and Paul Deckelman

Omaha, June 5 - Positive headlines and a large issue from National Australia Bank buoyed the investment-grade market slightly Thursday.

Panhandle Eastern Pipe Line Co., LP also priced an issue.

One source said he didn't know what to make of the headlines of an earnings spike for Wal-Mart Stores, Inc. that was a factor in boosting the stock market and others Thursday.

"It's funny because the markets like it when names like Wal-mart and Costco are doing well, but if you think about it, it's hard to know what that's a sign of," he said. "If the economy's doing well, would they really be posting these earnings?"

The markets felt better overall today, a source said, following a couple of days of negative Lehman Brothers headlines and comments about the economy from Federal Reserve chairman Ben Bernanke.

In the investment-grade secondary market Thursday, advancing issues trailed decliners by an almost three-to-two ratio, while overall market activity, reflected in dollar volumes, was little changed from Wednesday's pace.

Spreads in general were seen to have continued tightening a little as Treasury yields kept pushing upward, with the yield on the benchmark 10-year issue, for instance, moving out by 6 basis points to 4.04%.

National Australia 'successful'

The issue from National Australia Bank made it a good day for one source associated with the deal.

"It was very successful and we were very pleased," he said. "Two billion [dollars] for a Yankee bank is great right now, and a large size for a foreign issuer. It had a good level."

The $2 billion of 5.35% five-year notes priced at 99.996 to yield 5.351% with a spread of Treasuries plus 205 bps.

It priced under Rule 144A via Goldman Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Inc.

Panhandle Eastern brings $400 million

Panhandle Eastern priced $400 million 7% 10-year senior notes at 99.715 to yield 7.04% with a spread of Treasuries plus 300 bps.

Credit Suisse Securities, Banc of America Securities LLC and J.P. Morgan Securities Inc. were bookrunners.

Traders said the new Panhandle Eastern notes appeared too late in the session for any meaningful aftermarket action.

Terms were announced Thursday for an issue from General Electric Capital Corp. that priced Wednesday.

The company priced $1 billion medium-term floating-rate notes at par to yield three-month Libor plus 40 bps.

Goldman Sachs, J.P. Morgan, Merrill Lynch and Morgan Stanley & Co., Inc. ran the books.

American Financial postpones

There was also news about an issue announced Monday by American Financial Group, Inc.

Multiple market sources said Thursday that the issue had been postponed, or more likely pulled completely.

The holding company for property and casualty insurance had announced a $250 million issue of 10-year senior notes in a 424B5 Securities and Exchange Commission filing.

Merrill Lynch and UBS Investment Bank were bookrunners for the issue that was to be used to repay a portion of a bank line of credit.

There was no official word on why the issue wasn't happening, sources said, with some saying it was due to market conditions and others saying they heard various reasons.

"I heard it was postponed due to market conditions," one source said. "I don't think that really flies because you could price anything in this market."

Another source said the company was "trying to do a deal that didn't work."

Issuance for the week is likely done, with employment data coming out Friday that will likely stop anyone from doing any deals.

"The market seems stable right now," a source said. "It's rebounded nicely and equity is up."

Little Ambac impact

With a relative lack of new-deal activity, versus the busy levels seen earlier in the week, market focus was diffused.

A trader said that "nothing really specific" stood out.

He said that although Standard & Poor's downgraded the top ratings to bond insurers Ambac Financial Group Inc. and MBIA Inc., "it didn't really seem to have much effect on their bonds, from the little I saw."

However, at another desk, a trader saw MBIA's 14% surplus notes due 2033, which trade in dollar-price terms despite the issuer's nominal high-grade rating, "bouncing around" and ending at 77 bid, 79 offered, down about 4 points on the day.

Lehman bounces back

The first trader noted that Lehman Brothers Holdings Inc.'s bonds were "generically 5 to 10 bps better," in line with a rebound in the brokerage company's shares from the lows hit earlier in the week when investors worried about the company's liquidity position.

At another desk, a market source saw Lehman's 5.625% notes due 2013 tighten by 25 bps to about the 335 bps level. The 6.50% notes due 2017 were seen at 360 bps over comparable Treasuries, in about 10 bps from levels seen earlier in the week. Its 3.5% notes slated to come due on Aug. 7 were meantime quoted a bit tighter at 350 bps over.

A trader said that the cost of protecting Lehman's paper against a possible default had fallen by a whopping 45 bps on the day to about 210 bps.

He meantime saw other brokerage debt-protection costs narrow by at least 4 bps, and in some cases more, while credit-default swap costs for big-bank paper tightened by between 2 bps and 4 bps.

Among other financial names, American Express' 6.15% notes due 2017 were seen about 20 bps tighter at 215 bps over. But Merrill Lynch's 4.79% notes due 2010 widened out around 10 bps to the 270 bps area.

Verizon recovery

Apart from the financials, Verizon Communications' 6.10% notes due 2018 - which had widened out by more than 20 bps on Wednesday in a knee-jerk investor response to news reports that the company's majority-owned Verizon Wireless unit would acquire smaller rival Alltel Corp. in a $27 or $28 billion deal, tightened on Thursday when that deal was actually announced, perhaps on the realization that such a combination would save Verizon hundreds of millions of dollars of roaming charges it now pays to Alltel, and that it would make Verizon the biggest U.S. wireless operator, ahead of rival AT&T.

The bonds came in to about the 175 bps level, a tightening of either 10 bps or 20 bps, depending on whom you spoke to.

Suncor tightens up

Suncor Inc.'s new 6.85% bonds due 2039 were being quoted at 215 bps. That was in by 15 bps from the 230 bps over level at which the Calgary, Alta.-based energy company priced that $750 million of the bonds on Tuesday.

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