Wells Fargo prices FDIC-backed deal, Potomac Electric, Enterprise Products issue; Caterpillar tightens, Nexen eases

By Andrea Heisinger and Paul Deckelman

New York, Dec. 3 - Wells Fargo & Co. led the day's new issues, pricing under the Federal Deposit Insurance Corp. guarantee, with non-financial names like Enterprise Products Operating LLC and Potomac Electric Power Co. also doing deals.

The success of the FDIC-backed notes has also spurred financial names that had previously priced large issues under the program to continue issuing smaller deals.

Morgan Stanley and JPMorgan Chase & Co. both announced terms Wednesday for these smaller issues which were either reopenings or separate transactions.

In the investment-grade secondary market Wednesday, advancing issues led decliners by a five-to-four ratio. Overall market activity, reflected in dollar volumes, was down around 24% from Tuesday's pace.

Spreads in general were seen little changed, in line with generally stable Treasury yields; for instance, the yield on the benchmark 10-year issue edged upward by 1 basis point to 2.68%.

Tuesday's big new issue of Caterpillar Inc. bonds was seen to have tightened solidly in Wednesday's secondary dealings.

However, Consolidated Edison Co. of New York, Inc.'s new issue was seen little changed from the level at which it had priced.

Among established issues, Nexen Inc.'s bonds - which had tightened solidly on Tuesday after the Financial Times reported on its website that French oil and gas group Total SA might make a bid for the Calgary, Alta.-based energy exploration and production company - spat back all of those gains and then some on Wednesday, after the Times of London said Total had backed away from plans to acquire the Canadian company.

Wells Fargo does $6 billion

Keeping with the trend of multi-billion-dollar issues under the Temporary Liquidity Guarantee Program, Wells Fargo & Co. priced $6 billion of fixed- and floating-rate notes.

The deal was announced Tuesday, but took overnight to price as many of the similar deals have.

"It was another thing of waiting to see what interest was in Europe and Asia," a source close to the deal said. "We always have to kind of wait and see what happens."

The deal included $3 billion of three-year floaters priced at par to yield three-month Libor plus 85 basis points.

The second tranche was $3 billion of 3% three-year notes priced at a spread of Treasuries plus 195 bps.

Banc of America Securities LLC, Goldman Sachs & Co., Morgan Stanley & Co. and UBS Investment Bank ran the books.

Enterprise Products prices five-years

Enterprise Products Operating, a subsidiary of Enterprise Products Partners LP, priced $500 million of 9.75% five-year senior notes Wednesday.

The notes priced at par to yield 9.75%. A spread was not available for the issue.

Barclays Capital, DnB NOR Markets, Mizuho Securities, RBS Greenwich Capital, Scotia Capital and Wachovia Capital Markets were bookrunners.

Potomac Electric does bonds

Potomac Electric Power priced $250 million of 7.9% 30-year first mortgage bonds at par to yield 7.9% with a spread of Treasuries plus 462.7 bps.

This deal is one of few 30-year notes that have priced recently. There was still interest, a source said.

"They were first mortgage bonds, which people want," he said. "It wasn't the best rated but it did pretty good." The notes were assessed at Baa1 by Moody's Investors Service, BBB+ by Standard & Poor's and A by Fitch.

Bookrunners were J.P. Morgan Securities, Morgan Stanley, Scotia Capital, SunTrust Robinson Humphrey and Wachovia Capital Markets.

JPMorgan reopens FDIC notes

JPMorgan Chase reopened its two-year FDIC-backed floating-rate notes on Tuesday to add another $350 million, with terms released Wednesday.

The total issuance is now $5.35 billion, including $5 billion priced Nov. 26.

The reopened notes have a coupon of three-month Libor plus 50 bps and priced at 100.005.

J.P. Morgan Securities was bookrunner.

GE Capital, Regions on FDIC list

Two names remained Wednesday on the list of those expected to priced FDIC-backed issues in the near future.

GE Capital Corp. had announced plans in a Securities and Exchange Commission filing Tuesday to price a deal under the guarantee.

Sources said Wednesday that there could be a deal priced Thursday, but were reluctant to give a definitive time frame citing volatile market conditions.

Regions Bank has also been mentioned by sources as a possible issuer under the FDIC program.

Issuance to wind down

The week has likely seen the largest bulk of its new deals already, a source said, with several pricing Tuesday and Wednesday.

"I think we may see a few more smaller deals, and maybe a couple FDIC ones, but it's not going to be like earlier in the week," he said.

The source noted there remains limited time to get deals in before the end of the year.

Some lesser-rated issuers that were part of a backlog have seen conditions improve enough in the last couple of weeks to price their deals.

"We saw a couple more today," he said. "A lot of them were utilities, and they're kind of safe, so people are going to buy them."

Caterpillar tightens up

With financial sector primaryside activity still dominated by the new FDIC-backed issues, which trade off the agency desks like Fannie Mae or Freddie Mac paper because of the explicit government guarantee, most secondary action remained focused on the non-financial sector, the industrials and utility issuers.

Caterpillar's new three-part deal was seen to have firmed smartly from the levels at which the heavy-equipment maker's bonds had priced on Tuesday.

A trader saw its $350 million of new notes due 2013 and $900 million of new notes due 2018 trading at a spread versus comparable Treasuries of 515 bps bid, 510 bps offered, versus the 535 bps spread at which the five-years had priced and the 525 bps pricing spread on the 10-years. He also saw Cat's $350 million of new bonds due 2038 - which had priced at 510 bps over - now trading at 488 bps bid, 480 bps offered.

At another desk, a trader said that the 2013 bonds had tightened all the way to 485 bps bid, 480 bps offered. He saw the 2018s at 515 bps bid, 510 bps offered, while the 2038s were at 470 bps bid, 460 bps offered.

Con Ed seen steady

On the other hand, a trader saw Con Ed's new $5600 million of 7.125% notes due 2018 "hovering around issue." The New York-based electric utility had priced the bonds Tuesday at a spread of 450 bps over.

Existing Enterprise bonds easier

Elsewhere on the new-deal scene, the Enterprise Products deal came too late in the session for any meaningful aftermarket action. However, a market source was quoting the company's established 6.50% notes due 2019 as having widened out around 40 bps, to about the 700 bps level.

Nexen gyrates wildly

One of the more notable movers was Nexen , whose bonds had tightened on Tuesday - but got walloped on Wednesday as takeover speculation withered on the vine.

Nexen's 6.40% bonds due 2037, which on Tuesday had tightened by around 80 bps to the 500 bps level, were seen by a market source on Wednesday having widened back out by more than 100 bps to 609 bps over on the latest news, as reported by the Times of London. In dollar-price terms, the bonds gyrated wildly, moving from around a 73 bid earlier Tuesday to around 80 at the close, but then back down to around 71 on Wednesday, mostly on large-block trades.

Nexen's New York Stock Exchange-traded shares, which had jumped as much as 9% on Tuesday on takeover talk generated by the FT report, plunged as much as 24% in intraday dealings on Wednesday before ending down $1.49, or 7.90%, at $17.36. Volume of 26 million was over three times the norm.

The Financial Times had reported Tuesday that Total might be willing to bid as much as $16 billion for Nexen, which it said had "attractive assets in the North Sea, the U.S., Canada and Yemen, and with about 250,000 barrels of oil equivalent per day of production is large enough to make a material difference to Total or other oil majors. It is also highly cash-generative." The paper said that Total had secured a financing package of some $9.5 billion from a banking syndicate comprised of Société Générale, HSBC, BNP Paribas, RBS and Credit Agricole and was considering making an offer of C$38 per share.

However, on Wednesday, the Times of London said that Total's board had not held a scheduled meeting Tuesday at which directors were to have approved such a bid, but rather, that "some elements on Total's board have concluded that a deal would be too risky in the current climate, in view of the poor outlook for the global economy and the falling oil price."

There was still no official confirmation of anything, one way or another, from either company. Citigroup economist David Thomas said in a Wednesday research note that "[a]lthough a Total offer for Nexen is within the realms of possibility, we feel it is unlikely."

He said the French company usually did not go in for hostile takeover attempts.

Analyst Philip Adams of the Gimme Credit investment advisory service characterized the Nexen-Total story as "a lovely rumor while it lasted," accurately predicting in his research note that the Nexen bonds would do a U-turn after Tuesday's gain and head back downward.

However, he said that "the larger, well-capitalized, highly-rated energy companies should take advantage of depressed equity prices to further consolidate the industry."

Consumer product companies active

One of the most active issues Wednesday was Johnson& Johnson's 5.15% notes due 2012; over $60 million of the bonds changed hands as it tightened to a spread of a 54 bps, a market source said.

However, Procter & Gamble Co.'s 5.50% bonds due 2034 were seen having widened out markedly to 256 bps over, as the bond's dollar-price slid by nearly 4 points to the 96 level. Over $25 million of the bonds were traded.

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