3M prices $800 million; more activity expected later in week; recent issues unchanged in secondary

By Andrea Heisinger

New York, Oct. 27 - An investment-grade bond issue placed quietly by 3M Co. kicked off an uncertain week on Monday.

A two-day Federal Reserve meeting begins Tuesday, although sources were not sure if it would have an effect on any possible issuance.

Most recent issues in the secondary market were dormant, although PepsiCo Inc.'s recent issue was still seen near the top of trading volume.

3M prices $800 million

Industrial and consumer products company 3M priced $800 million in 4.5% three-year notes Monday, sources said late in the afternoon.

The notes priced to yield Treasuries plus 275 basis points.

J.P. Morgan Securities Inc. was the bookrunner.

Given the state of the market Monday, one source said he was a little surprised to see the issue.

"We were pretty surprised to see anything come out today," he said.

This was after the markets closed, with the stock market ending flat after a day of ups and downs.

"These days you never know," a source said. "If there's a name that thinks it can get a deal done they'll go for it."

Week starts slowly

Volatility from Friday carried through the weekend and spilled into Monday, a source said, despite a bit of positive economic news coming out of the housing sector.

The Commerce Department reported that new home sales were up 2.7% in September, while existing home sales rose 5.5%.

This did little to offset the continually sour financial news coming out, a source said.

"Things were pretty slow today," he said. "A lot of things are imminent, but it depends on a lot of things."

A two-day Fed meeting starts Tuesday and continues Wednesday. It's possible there could be issuers on either of these days if conditions are right, a source said, adding that even in this environment people are paying attention to the meeting.

"Everything does matter at this point," he said. "We could see some issuers on either of those days. It's not like before when no one would issue on Fed [meeting] days."

A good portion of deals done in September were large and in some cases multi tranche despite the worsening market conditions.

Two issues from last week, from Baker Hughes Inc. and National Rural Utilities Cooperative Finance Corp., were more than $1 billion.

"These companies figure they would rather take a big chunk [out of the market] at a time in case things get bad," a source said, referring to companies looking down the road.

Many are large, highly rated companies that can afford to pay the high prices required to come into the market.

It is difficult to predict what the rest of the week will look like, and sources were hesitant to make predictions.

There is a huge calendar that has been building, one source said, adding that "it's just a matter of time before it comes out."

A syndicate source said more activity is expected later in the week if the market stabilizes.

Baker Hughes unchanged

Bonds from Baker Hughes' two-tranche issue last Thursday were mostly unchanged Monday, a secondary source said.

The 6.5% five-year notes were quoted at 400 bps bid, 390 bps offered, while the 7.5% 10-year notes were at 399 bps bid, 397 bps offered.

Both tranches priced at 400 bps over Treasuries.

National Rural widens

The issue of 10.375% 10-year bonds from National Rural Utilities was seen wider Monday afternoon.

The bonds were quoted at 625 bps bid, with no offer. This was nearly 20 bps out from pricing at 608.1 bps.

Verizon unaffected

Verizon Communications Inc.'s announcement of a 31% increase in third-quarter earnings from 2007 did not affect movement on its bonds, a trader said.

There was "not much change," he said mid afternoon.

JPMorgan, Pepsi top traders

An issue of 7.9% perpetual preferreds from JPMorgan Chase & Co. was seen topping the trading list in the secondary market Monday afternoon.

Behind it was the recent issue of 7.9% 10-year notes from PepsiCo that has seen heavy trading since pricing Oct. 21.

The spread on the notes has come in about 100 bps, to a level of 317 bps from the pricing level of 420 bps over Treasuries.

Credit Suisse top mover

Credit Suisse was seen as one of the day's top movers, with its 5.5% bonds due 2011 coming in more than 60 bps by late afternoon.

The Swiss financial firm reported third-quarter growth with hedge funds, making gains following Lehman Brothers' bankruptcy filing.

© 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.