Baxter International sells debt to high demand; Morgan Stanley, Best Buy widen in trading

By Andrea Heisinger and Cristal Cody

New York, Dec. 14 - Baxter International Inc. was the only entrant into the high-grade debt market on Wednesday, continuing the light issuance characteristic for the week.

The medical products company upsized its deal to $500 million from $350 million of five-year paper that was sold at the tight end of price talk.

There aren't any new deals anticipated for Thursday, sources said.

"I think it's going to be a dull one," a syndicate source said. "It's possible someone could go if they need to, but we're not hearing of anything."

Issuers are expected to mostly wait until January to access the debt market.

The PPL Energy Supply LLC deal that priced the previous day was one of those opportunistic issuers for the week, according to a source from the company. PPL had been monitoring the market and decided the tone was constructive enough on Tuesday to sell its debt, and the company did so at what they saw as an attractive coupon.

Corporate bonds traded wider on the day. The Markit CDX Series 17 North American high-grade index eased 3 basis points to a spread of 130 bps.

Baxter International's new notes were among the exception and traded about 4 bps tighter.

Bank and financial paper traded 5 bps to 15 bps weaker, led by Morgan Stanley's benchmark notes.

Investment-grade bank and brokerage credit default swaps costs rose on Wednesday, showing less investor confidence in the financial sector.

Bank paper CDS costs were up 5 bps to 12 bps. Brokerage company paper CDS costs traded up 8 bps to 15 bps.

Telecommunication bonds were weaker by 3 bps to 10 bps.

Best Buy Co., Inc.'s notes widened a second day after the company reported weaker earnings the previous day.

"Best Buy bonds were pretty active again today," a trader said. "They probably closed about 15 basis points wider yesterday. and they're 10 wider today."

Canadian miner Kinross Gold Corp.'s bonds widened as gold prices sank.

PPL's bonds traded unchanged over the day.

Overall trading volume was flat at about $10 billion.

Treasuries rose higher again on Wednesday, sending yields down. The 10-year Treasury note yield dropped 7 bps to 1.9%. The 30-year bond yield closed down 11 bps to 2.9%.

Baxter offers five-years

Baxter International sold an upsized $500 million of 1.85% five-year senior notes (A3/A+/A) to yield 100 bps over Treasuries, an informed source said.

The size of the trade was increased from $350 million. The paper was sold at the tight end of guidance in the 105 bps area.

The deal had over $400 million on the books initially, but demand ended at about $3.5 billion, the informed source said.

"We were in and out," the source added.

Bank of America Merrill Lynch, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC ran the books.

Proceeds are being used for general corporate purposes.

In the secondary market, the notes traded tighter at 96 bps bid, 93 bps offered, a trader said.

The medical products and health care company is based in Deerfield, Ill.

Morgan Stanley cheaper

Morgan Stanley's 5.5% notes due 2021 widened 15 bps on Wednesday to 490 bps bid, 470 bps offered, a trader said.

Morgan Stanley priced the notes on July 21 at 250 bps over Treasuries.

The investment bank is based in New York City.

Best Buy widens

Best Buy's 3.75% senior notes due 2016 (Baa2/BBB-/BBB+) widened 10 bps to 425 bps bid, 405 bps offered on Wednesday on the back of disappointing third-quarter earnings, a trader said.

The notes had moved out about 15 bps on Tuesday.

The company's stock fell more than 15% on Tuesday and fell another 2% on Wednesday after the company said that earnings fell nearly 30%.

Best Buy sold the five-year notes in a $350 million tranche at a spread of Treasuries plus 162.5 bps on March 8.

The electronics and entertainment retailer is based in Richfield, Minn.

Kinross Gold weak

Gold prices sank nearly 5% on Wednesday.

In the secondary market, Kinross Gold's 5.125% senior notes due 2021 (Baa3/BBB-/BBB-) were quoted early on Wednesday at 375 bps bid, 355 bps offered, a trader said.

The company sold $500 million of the notes on Aug. 16 at a spread of 290 bps over Treasuries.

The mining and gold ore processing company is based in Toronto.

PPL Energy unchanged

PPL Energy Supply's 4.6% 10-year senior notes (Baa2/BBB/BBB) traded flat at 262 bps bid, 255 bps offered on Wednesday, a trader said.

"Haven't seen much on it," the trader said.

The company sold $500 million of the notes to yield Treasuries plus 262.5 bps on Tuesday.

The utility is based in Allentown, Pa.

Paul Deckelman contributed to this review

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