Barclays, Principal Life, Plains All American price; IG market tightens across board despite negativity

By Andrea Heisinger

Omaha, April 18 - Negative earnings announcements didn't stop the flow of new issues Friday, with Plains All American Pipeline LP, Principal Life Income Fundings Trust 37 and Barclays Bank plc pricing offerings.

Citigroup announced a more than $5 billion loss for the last quarter, as well as job cuts. The news didn't seem to faze the investment-grade market, sources said.

Several other banks also announced write-downs this week, including smaller regional banks that did moderately better than expected.

Following the earnings announcements, many financials brought large issues to the market including that from Barclays Friday.

The bank priced $2 billion in perpetual hybrid preferred stock at par. The preferreds are non-callable for 10 years. They carry a dividend of 7.7% for 10 years, and then switch to a floating rate of three-month Libor plus 424 basis points.

The issue priced via Rule 144A.

Barclays Capital Inc. was bookrunner.

Principal sells $300 million

Principal Life priced $300 million of 5.55% seven-year secured medium-term notes at 99.679 to yield 5.606% with a spread of Treasuries plus 235 bps.

Banc of America Securities LLC, Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc. were bookrunners.

Plains All American priced $350 million of 10-year senior notes at Treasuries plus 275 bps, according to a press release and market sources.

The issue priced via Rule 144A.

Week totals $33 billion

The week posted a total of more than $33 billion in new issues, most of them more than $1 billion.

Those issuers included Dell Inc., HSBC Holdings, XTO Energy Inc., E.On International Finance BV, The Royal Bank of Canada, General Electric Capital Corp., JPMorgan Chase & Co. and Lehman Brothers Holdings Inc.

Smaller issuers included Virginia Electric & Power Co., CoBank ACB, Zions Bancorporation, Martin Marietta Materials Inc. and Principal Life Income Fundings Trust 36.

The $8.5 billion issue from General Electric was one of the largest corporate issues ever, market sources said.

The last issuer to come close to that mark was AstraZeneca plc with its $6.9 billion issue in September 2007.

One market source called the issue "gutsy" considering the company announced negative earnings this week.

Industrials expected

Friday marked the end of earnings announcements for many bigger companies, a source said, and now the focus of issuers will change.

"The theme will be industrial issuers for a while now," he said. "People feel that the worst of the news is out on the table with earnings and there wasn't anything too disastrous there."

The market held up well throughout the week with most spreads actually showing improvement.

"The market's looking good right now and spreads have tightened in most cases," a source said. "Companies are going to seriously focus on coming into the market in the next week or two."

Total supply for the coming week should be slightly less only because of the amount of large issues pricing this week, the source said.

The secondary market was also holding up Friday although there wasn't a lot to keep traders busy.

"It's fairly quiet, not a lot going on," one source said, chalking it up to being the day before Passover.

Plains, Citi better in trading

The issue from Plains All American had tightened nearly 10 bps after pricing to 266 bps bid, the source said.

"That seems to be the trend right now," he said. "Deals come and tighten in right away."

Citigroup bonds were seen a little better today despite the earnings announcement, following along with the tightening trend of the market.

Lehman, GE deals perform well

Lehman Brothers' 6.875% 10-year notes from Thursday had "tightened significantly," according to one secondary source.

They priced at Treasuries plus 320 bps and as of mid-afternoon Friday had tightened to 283 bps offer, 277 bps bid, a source said.

One source said he was surprised at the level of tightening in the Lehman notes and said it could be because it was a name that until recently didn't have a lot on the table.

At least two of the three tranches from the GE deal were also a little tighter, a source said.

The five-year notes were seen at 180 bps bid versus Treasuries plus 205 bps pricing. The 10-year tranche was close to that level, the source said.

"Paper across the board is tighter," a secondary source said. "There's just a better feeling out there across the board. Things were at the bottom and the only way to go is up."

Financial sector gains

Bank and brokerage spreads were also seen five 10 bps tighter, a source said.

Among the things contributing to the upward turn of the secondary market was the better-than-expected regional bank earnings announcements.

The Treasury market is "a little funky right now," a source said. The 30-year long bond is up with short maturities inverted and moving lower, he said.

As a whole, the negative earnings announcements have bounced off both the primary and secondary markets without making much impact, sources said.

"Most paper is five to 10 bps tighter across the board, even those that had big losses," a source said.

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