Eaton, NiSource, Deutsche Bank, Harley Davidson, HBOS price; new issue premiums continue decrease

By Andrea Heisinger and Paul Deckelman

Omaha, May 15 - New issues from Eaton Corp., NiSource Finance Corp., Deutsche Bank, Harley Davidson Funding Corp. and Halifax Bank of Scotland plc priced on a solid Thursday.

Sources commented that again they were surprised it was not a busier day of issuance. The easing in volume could be due to many companies issuing earlier in the week, a source said.

In the investment-grade secondary market Thursday, advancing issues led decliners by a three-to-two ratio, while overall market activity, reflected in dollar volumes, rose by about 3.5% from Wednesday's pace.

Spreads in general tightened as Treasury yields rose, with the yield on the benchmark 10-year note, for instance, increasing by 7 basis points to 3.84 %.

Eaton oversubscribed

Eaton priced a two-tranche issue of notes totaling $750 million.

The $300 million of 4.9% five-year notes priced at 99.926 to yield 4.917% with a spread of Treasuries plus 182 bps.

The $450 million of 5.6% 10-year notes priced at 99.744 to yield 5.634% with a spread of Treasuries plus 182 bps.

Both tranches had price talk of 185 bps area and came in at the tight end of that.

The company plans to use the proceeds from the issue for the acquisition of Moeller Group and Phoenixtec Power Co., a source close to the deal said.

The issue was four to five times oversubscribed.

Bookrunners were Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and Morgan Stanley & Co. Inc.

NiSource at tight end

NiSource priced $700 million senior unsecured notes in two tranches.

The company reopened its 6.15% notes due 2013 to add $200 million. They priced at 100.378 to yield 6.055% with a spread of Treasuries plus 292 bps.

Price talk was 295 bps area, with the tranche coming in at the tight end of that.

Total issuance is now $545 million including $345 million issued Feb. 19, 2003.

The company also priced a $500 million tranche of 6.8% notes due 2019 at 99.724 to yield 6.834% with a spread of Treasuries plus 297 bps.

The tranche priced at the tight end of price talk of 300 bps area.

Bookrunners were Banc of America Securities LLC, J.P. Morgan and Wachovia Capital Securities LLC.

Deutsche Bank, through its London branch, priced $1 billion of five-year notes at Treasuries plus 180 bps.

The issue priced later in the day, a market source said, and terms were not available at press time.

Deutsche Bank Securities Inc. was bookrunner.

Two issues priced Thursday via Rule 144A.

Harley Davidson priced $1 billion 10-year notes at Treasuries plus 300 bps via Citigroup and J.P. Morgan.

HBOS priced $2 billion 6.75% 10-year subordinated bank notes at 99.584 to yield 6.808% with a spread of Treasuries plus 295 bps.

Goldman Sachs & Co., Lehman Brothers Inc. and Morgan Stanley & Co. Inc. ran the books.

New deal premiums shrink

More stable market conditions in the last few weeks have resulted in lower new issue premiums.

The trend has for them to go down, with most landing around 15 or 20 bps, a market source said.

"We were seeing them averaging 25 to 30 bps back in the day," he said. "There was nothing to stop issuers from backing up a deal. We saw some that were more than 100 bps."

"Now things are a little more stable and we're not seeing that."

Another effect of the stability has been more issuers coming into the market on Fridays. Several large issues from financial names have come into the market on Fridays in recent weeks.

"There are a few things that could potentially price tomorrow," a source said. "We could piece something together, but nothing definite."

Another source said it appears it will be quiet, but that doesn't mean there isn't a self-led deal lurking.

"We could have a deal or two tomorrow," he said. "No one's expecting it to be busy, but something should happen."

HBOS tighter

A trader saw the new Halifax Bank of Scotland 6.75% subordinated notes due 2018, which had earlier priced at a spread of 295 bps over comparable Treasury issues, going home at 291 bps over.

Investors in the new Harley-Davidson Funding 10-year notes were not exactly living high off the hog - but the new bonds did tighten a little, to about 297 bps over versus 300 bps at the issue's pricing.

New deal keep gaining

Other recently priced issues were meanwhile seen continuing to come in on Thursday.

Philip Morris International Inc.'s 4.875% notes due 2013, which had priced Tuesday at 177 bps over and which had then firmed more than a dozen basis points on Wednesday, continued to tighten markedly, a market source quoting them as having narrowed to as low as 131 bps.

Petro-Canada Ltd.'s 6.05% notes due 2018, which had priced at 230 bps over on Monday, were seen trading around 219 bps. Another Monday issue, Harsco Corp.'s 5.75% notes due 2018, was seen at a spread of 189 bps over, versus their 200 bps pricing spread.

Hartford Financial Services Group, whose 6% notes due 2019 priced at 210 bps last week, was seen having tightened another 4 bps on Thursday to the 177 bps level.

GlaxoSmithKline plc's 4.85% notes due 2013, which priced at 173 bps over last week, had firmed solidly by Thursday to 146 bps over; however, its 5.65% notes due 2018 and 6.375% bonds due 2038, each of which had also priced at 173 bps off that session, have only tightened modestly, seen Thursday at 171 bps and 170 bps over, respectively. Sector peer Bristol-Meyers Squibb's 6.125% bonds due 2038 were meantime at quoted at a 162 bps spread, versus 165 bps when the bonds priced on April 28.

Among other issues, M&T Bank's 5.375% notes due 2012 came in by 20 bps to around the 260 bps level. National City Corp.'s 4.90% paper due 2015 ballooned out some 25 bps to about the 485 bps area.

In the credit-default swaps market, a trader said that debt-protection costs for big-bank paper and that of major brokerages were 1 to 2 bps tighter pretty much across the board.

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