PPG Industries, Equitable Resources, Medco, American Electric price; supply may not be done for week

By Andrea Heisinger and Paul Deckelman

Omaha, March 13 - Issues left over from the previous day's overstuffed market priced Thursday, including those from PPG Industries, Inc., Equitable Resources Inc., Medco Health Solutions, Inc. and American Electric Power Co. Inc.

These issues were all announced Wednesday, but did not price.

Market sources said there were simply too many issues in the market to be handled.

In the investment-grade secondary market Thursday, advancing issues outnumbered decliners by a not-quite six-to-five ratio, while overall market activity, reflected in dollar volumes, fell by about 15% from Wednesday's levels.

Bear Stearns Co.'s bonds widened out markedly while its shares nosedived on renewed market rumors about the Number-Five U.S. brokerage's liquidity situation - despite new company denials - on the heels of a negative story in The Wall Street Journal indicating that some wary Wall Streeters are shying away from doing deals with Bear out of concerns about the adequacy of its capital position.

Medco brings $1.5 billion

Medco priced a $1.5 billion issue in five and 10-year tranches.

The $300 million 6.125% five-year notes priced at 99.425 to yield 6.261% with a spread of Treasuries plus 375 basis points.

The $1.2 billion of 7.125% 10-year notes priced at 98.956 to yield 7.274% with a spread of Treasuries plus 375 bps.

Citigroup Global Markets, Banc of America Securities LLC, J.P. Morgan Securities Inc. and Barclays Capital Inc. ran the books.

Equitable matches talk

Equitable Resources priced $500 million of 6.5% 10-year senior notes at 99.321 to yield 6.593% with a spread of Treasuries plus 312.5 bps.

This was in line with talk of 312.5 bps area, a source close to the deal said.

Banc of America, Citigroup, J.P. Morgan and Lehman Brothers Inc. were bookrunners.

PPG upsizes

PPG Industries upsized its $1.55 billion issue from two to three tranches.

The issue was originally in five and 10-year tranches, but a 30-year tranche was added, a source close to the deal said.

The $600 million of 5.75% five-year notes priced at 99.949 to yield 5.762% with a spread of Treasuries plus 325 bps.

The $700 million of 6.65% 10-year notes priced at 99.95 to yield 6.657% with a spread of Treasuries plus 312.5 bps.

The $250 million 7.7% 30-year tranche priced at 99.433 to yield 7.749% with a spread of Treasuries plus 330 bps.

Bookrunners were Credit Suisse Securities LLC, Deutsche Bank Securities Inc., J.P. Morgan and Morgan Stanley & Co. Inc.

AEP draws retail buyers

American Electric Power priced a $275 million split-rated issue of 8.75% junior subordinated notes at $25.

They have a final maturity of March 1, 2068.

Citigroup, Merrill Lynch, Pierce, Fenner & Smith Inc., Morgan Stanley, UBS Investment Bank and Wachovia Capital Securities LLC were bookrunners.

Since it was more of a retail transaction, it had most of its interest from the high-grade side despite its split rating, a source close to the deal said.

Final terms were given Thursday for the two-tranche American Express Co. issue of senior notes that priced late Wednesday.

The $2 billion tranche of 7% 10-year notes priced at 99.617 to yield 7.054% with a spread of Treasuries plus 362.5 bps.

The $1 billion tranche of 8.15% 30-year notes priced at 99.633 to yield 8.183% with a spread of Treasuries plus 380 bps.

Citigroup, J.P. Morgan, and Merrill Lynch were bookrunners.

An issue from Toyota Motor Credit Corp. also priced Wednesday. The company priced $200 million one-year floating-rate notes at par to yield prime rate minus 279 bps.

Citigroup was agent.

Friday seen quiet

Friday should be quiet, wrapping up a week where a window for issuance opened and companies took advantage of it.

One market source said he knew of nothing set to price Friday, while another said he wouldn't rule out any issues.

"The bulk of what was going to come this week already has," the source said. "There could be something for Friday, though."

The tone was bad Thursday morning after more negative headlines, but improved slightly throughout the day.

"There's still more disparity in the credit markets," a source said. "I wouldn't say the tone improved at all from Wednesday."

New issue premiums for Thursday were at the high end of what's been seen recently, a source said, partly due to the quality of the issuers.

Those that were held over from Wednesday were mostly those with lower credit ratings.

"I would say they were suffering from lack of demand," a source said.

Bear plunges

Bear Stearns' bonds were seen to have ballooned out by nearly 100 bps from their late-Wednesday levels. A market source pegged Bear's 6.40% notes due 2017 at around 653 bps over the 10-year Treasury, well out from around 553 bps on Wednesday, translating to a loss of more than 6 points on the day.

The company's 5.5% notes due 2011 did even worse, its spread seen jumping into distressed territory, out 1,032 bps versus 598 bps late Wednesday, as a wave of late selling, in sizable blocks, dropped the bonds' dollar price by almost a dozen points to 83.5 bid.

On the other hand, its 7.25% notes due 2018 - after at one point in the day having gapped out to around the 675 bps mark from 610 bps - actually finished just below 600 bps, in active dealings.

Its New York Stock Exchange-traded shares meantime plunged by as much as 18% in the early going before coming up from its lows to finish down $4.58, or 7.44%, at an even $57. Volume of 70.5 million shares was around eight times the average daily turnover.

Bear - whose bonds had cratered on Monday amid new market rumors about the company's liquidity, only to bounce back smartly from those oversold levels on Tuesday on company reassurances - were back in the tank on Thursday after the Journal reported in its widely read "Heard On The Street" that "in a sign of how skittish Wall Street has become in recent months, the New York investment bank is facing increasingly tough trading conditions" - even though company executives say they are in no danger of a cash crunch.

The paper said that traders handling such long-term transactions as CDS swaps "said they are being extra cautious when Bear is the counterparty. In some cases, traders are seeking higher-ups' permission before acting."

The article said that clients of such Bear Stearns rivals as Goldman Sachs, Deutsche Bank and Morgan Stanley are asking those firms to take on the role of counterparty to Bear in completed transactions - a tactic which "frees clients from exposure in the event a firm can't cover its obligations on a trade."

The Journal further reported that in a reprise of the conditions that prevailed at the height of the credit-crunch panic that shook the financial markets last summer, some hedge funds that use Bear as a prime broker "have been shifting portions of their business to other firms in recent weeks" - attributing those sentiments to "hedge-fund managers and consultants who help pension funds and wealthy people choose where to place their money."

The new questions about the firm come despite repeated - and heated - denial that anything is amiss by Bear's president and chief executive Alan Schwartz and its chief financial officer, Samuel Molinaro. The latter insisted that no hedge-fund clients serviced by Bear's prime-brokerage unit, which lends capital and facilitates trades, have been unable to redeem cash.

AmEx gains

Apart from the Bear Stearns debacle, a trader saw the new American Express 10-year bonds having firmed smartly in secondary dealings, tightening to a spread over Treasuries of 337 bps bid, 331 bps offered, well in from their 362.5 bps spread at the pricing.

He said that the new PPG bonds "looked like they were back to issue bid" - 325 bps for its 5-years, 312.5 bps for its 10-years and 330 bps by its 30-years.

The new Northern States Power Co.'s 5.25% notes due 2018 were at 174 bps bid, 170 bps offered - a widening from Tuesday's spread at issue of 170 bps.

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