GE Capital, Bank of America, Medtronic, PG&E sell notes; spread widen

By Andrea Heisinger and Paul Deckelman

New York, March 9 - A handful of new issues made their way to the primary high-grade market Monday, including two, from General Electric Capital Corp. and Bank of America Corp., that are backed by the Federal Deposit Insurance Corp. The day's other deals came from Medtronic Inc. and PG&E Corp.

In the secondary sphere on Monday, a market source said the widely followed CDX Series 11 North American high-grade index was wider buy 12 basis points on the day to a mid bid-asked spread level of 262 bps from 250 bps on Friday.

Advancing issues continued to trail decliners, by a three-to-two ratio. Overall market activity, reflected in dollar volumes, rose about 4% from the levels seen on Tuesday.

Spreads in general were seen a bid wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year issue fell by 3 bps to 2.85%.

B of A sells $8.5 billion

The bank holding company Bank of America sold an $8.5 billion issue of notes backed by the Federal Deposit Insurance Corp. It was one of two FDIC-backed issues to kick off the week.

The deal was in three tranches which were a mix of fixed- and floating-rate notes.

The $4 billion of floaters due 2010 priced at par to yield three-month Libor plus 3 bps.

A $2.5 billion tranche of three-year floaters sold at par to yield three-month Libor plus 20 bps.

The final tranche was $2 billion of 2.375% three-year notes priced at Treasuries plus 102.5 bps.

Banc of America Securities LLC ran the books.

A source away from the sale said he wasn't sure why there were two multi-billion-dollar FDIC-backed issues Monday.

"These are two names that are kind of hurting right now," he said. "It's not surprising. Maybe Citi will go next."

General Electric Capital has been in the news during the last few weeks as it faces liquidity difficulties and a possible rating downgrade from its AAA credit status.

GE Capital offers FDIC notes

GE Capital sold $8 billion notes in four tranches backed by the FDIC late Monday.

The deal was originally announced as being three tranches, a market source said.

A $1 billion tranche of two-year floaters sold at par to yield three-month Libor plus 8 bps. This was at the tight end of guidance of Libor plus 8 to 10 bps.

A $1.5 billion tranche of three-year floaters priced at par to yield three-month Libor plus 20 bps. This was in line with price talk of the Libor plus 20 bps area.

The remaining two tranches were fixed-rate notes.

A $4 billion tranche of 1.8% two-year notes priced at a spread of Treasuries plus 86.7 bps.

The $1.5 billion of 2.25% three-year notes sold at Treasuries plus 91.2 bps.

Citigroup Global Markets, Credit Suisse Securities, Goldman Sachs & Co., J.P. Morgan Securities Inc. and Morgan Stanley were bookrunners.

Medtronic prices three tranches

Medical technology company Medtronic priced $1.25 billion of senior notes in three tranches in a deal that took much of the day to sell. It priced late, a source close to the deals said, and full terms were not available at press time.

He noted "it went very well" but that the market was a little rough.

The $550 million of five-year notes sold at Treasuries plus 262.5 bps.

A $400 million tranche of 10-year notes priced at Treasuries plus 275 bps.

The final tranche was $300 million of 30-year bonds sold at Treasuries plus 295 bps.

The company plans to use proceeds for repaying a portion of its outstanding commercial paper.

Bookrunners were Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc.

PG&E does small sale

Pacific Gas & Electric sold an upsized $350 million of 5.75% five-year notes at Treasuries plus 395 bps early Monday.

The sale was increased from $250 million.

Citigroup Global Markets Inc., Goldman Sachs & Co. and Bank of New York Mellon were bookrunners.

KeyCorp announces FDIC sale

KeyBank holding company KeyCorp announced it will sell FDIC-backed senior notes in a Securities and Exchange Commission filing late Monday.

Two syndicate sources said they were not aware of the deal and had not seen it price. One source said it is likely going overnight to snag some of the European and Asian investors.

The deal will be in fixed- and floating-rate tranches, according to the filing.

They will be AAA rated and non-callable.

Credit Suisse Securities and J.P. Morgan Securities have been tapped as bookrunners.

Primary defies rocky tone

The market tone was "a little rocky" on Monday, a market source said. That didn't stop a handful of issuers from pricing, including two large deals backed by the FDIC.

"Yeah, I'm not sure why more are coming out," he said. "It was kind of bare for a while."

The prospect for issuance during the rest of the week are still up in the air, a source said, adding that "it was kind of negative today."

The past couple of weeks have been heavy on issuance at the beginning, with volume trailing off after Wednesday.

"I think we'll see kind of the same deal as last week," a source said. "There's not going to be a ton of deals."

Financials seen weaker

A trader said that "things were a little weaker, generally across the board," after starting out that way in the morning. He said that "it was a very quiet day, very thinly traded."

He saw J.P. Morgan Chase & Co.'s 6% notes due 2018 widen to 400 bps, "wider than it had been" - he noted that the bonds had traded at 360 bps over as recently as Thursday.

Meanwhile Wells Fargo & Co. Inc.'s 5¼% notes due 2012 were trading at 500 bps, also wider, adding that the trades were "$1 million, $2 million prints - people that have been sitting on this stuff for a while probably need to move it out."

GE Capital continues to struggle

He said that General Electric Co.'s beleaguered bonds, and those of its General Electric Capital Co, financial arm, "didn't move any wider and it didn't move any tighter."

However, a market source at another desk said that GE Capital's 5.45% notes due 2013 had ballooned out by around 50 bps on the session to the 800 bps mark.

Even one of the recent FDIC-backed GECC deals was seen substantially wider, with the 2.2% notes due 2012 widening out to 80 bps over, versus its spread of 59 bps over on Friday.

But another trader said that the company's 5½% notes due 2011 "actually caught a little bid today," moving up to a dollar-price level of 93 bid, 94 offered, a 2 point gain on the day.

Alcoa seen lower, J&J tighter

That trader also saw Alcoa Inc.'s 6% notes due 2012 about 2 points lower on the day at 80 bid, 81 offered, opining that the aluminum giant's liquidity "has dried up."

Another market source saw those bonds having widened more than 100 bps on the day to a spread of 1,300.

Among other industrial losers, Kraft Foods Corp.'s 6.25% notes due 2011 were about 50 bps wider at the 325 bps mark.

However, on the upside, Johnson & Johnson's 3.80% notes due 2013 came in by about 15 bps to end the day at around the 70 mark, on no news.

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