Caterpillar Financial, Goldman Sachs sell bonds; new Altria, Novartis, CME gain; P&G notes flat

By Andrea Heisinger

New York, Feb. 5 - The volume of new bond offerings in the investment-grade market fell Thursday as Caterpillar Financial Services Corp. and Goldman Sachs Group Inc. forced a shift in focus to financial names.

In the prospectus for its offering, Caterpillar notes it is at a disadvantage to other financing companies able to issue under the Federal Deposit Insurance Corp. guarantee, like the Goldman issue.

The secondary market saw mostly gains in recent issues, including continued tightening in all three tranches of the Altria Group Inc. deal from Tuesday. Procter & Gamble Inc.'s new bonds in two tranches, on the other hand, saw little gain and were virtually unchanged from pricing levels.

Caterpillar Financial active

Caterpillar Financial Services priced $3 billion of notes in three tranches, with a small short-dated one being added prior to launch.

The $350 million of 5.75% three-year notes priced at 99.978 to yield 5.758%, or Treasuries plus 437.5 basis points.

A $1.65 billion tranche of 6.125% five-year notes priced at 99.879 to yield 6.153%, or Treasuries plus 425 bps.

The final tranche was $1 billion of 7.15% 10-year notes priced at 99.83 to yield 7.174%, or Treasuries plus 425 bps.

Barclays Capital Inc., Goldman Sachs & Co. and Citigroup Global Markets Inc. ran the books.

In a 424B3 filing with the Securities and Exchange Commission announcing the offering, the company said that government programs implemented in 2008, which were intended to help the U.S. financial system, had unintended consequences for them and other companies not allowed to participate.

"Some of our competitors have been permitted to participate in certain of these programs including the FDIC's Temporary Liquidity Guarantee Program, which has effectively created below-market subsidized financing for those competitors and could continue to negatively impact our ability to issue debt at rates that are comparable to those offered by our competitors," Caterpillar says in the prospectus.

The company calls 2009 "the weakest year for growth in the post-war period."

"As a result, for 2009, we expect our profit before tax to decline by about half as a result of higher liquidity costs, such as costs for additional credit facilities, maintaining a higher cash balance and higher borrowing rates, resulting in lower spreads between the cost of borrowing and our lending rates," according to the prospectus.

The company announced layoffs of 12,000 workers due to the economic decline.

Goldman Sachs sells FDIC notes

Goldman Sachs Group priced a small issue of floating-rate notes backed by the FDIC.

The $600 million of floaters due Nov. 9, 2011 priced at par to yield three-month Libor plus 25 basis points.

Goldman Sachs & Co. ran the books.

Focus shifts as pace slows

The day saw mostly financial or finance-related issuers Thursday.

One source said he was "kind of surprised" to see Caterpillar Financial bring a $3 billion issue but that it did fairly well.

"They're a name that doesn't do big debt like this very often," he said. "I think they're kind of shoring up right now."

He was referring to the company's recent announcement of 12,000 layoffs and dismal earnings.

The company has maintained its single-A rating of A2/A/A+, and that may have helped.

"These single-As have been doing pretty well in this environment," the source said. "They've all been oversubscribed ... several times in some cases."

The small issue from Goldman was not remarkable, he said, as most of the day's focus was on the Caterpillar issue, which priced fairly late.

Issuance may be done for the week, but there's always a possibility of some sort of deal getting done.

"You never know," a source said. "It could be really quiet, or we could have some big issue."

Novartis bonds gain

Issues of bonds under Novartis AG subsidiaries were seen doing well in trading late Thursday afternoon, a trader said.

Both tranches priced at 225 bps over Treasuries.

The 4.125% notes due 2014 were nearly 50 bps tighter at 176 bps bid.

The 5.125% notes due 2019 did not do quite as well but still came in 25 bps to 35 bps to 200 bps bid, 190 bps offered.

CME bonds in 20 bps

New bonds from CME Group Inc. were seen about 20 bps tighter Thursday, a trader said, a day after pricing.

The 5.75% notes due 2014 were priced at 387.5 bps over Treasuries and were quoted at 368 bps bid, 364 bps offered.

Georgia Power firms

The new 5.95% notes due 2039 from Georgia Power Co. firmed 10 bps to 15 bps a day after pricing, a trader said.

They were seen at 214 bps bid, 209 bps offered, in from their Treasuries plus 225 bps price.

Altria bonds tighten

The recent three-tranche issue from Altria Group was seen dramatically tighter two days after pricing, a trader said.

All of the notes were doing well, but the five-year notes had firmed the most.

These 7.75% bonds due 2014 were at 489 bps bid, 480 bps offered, which was about 100 bps better than the Treasuries plus 587.5 bps price.

The 9.25% notes due 2019 were in around 40 bps to 601 bps bid, 595 bps offered from the 637.5 bps over Treasuries price.

And the 10.2% notes due 2039 were at 615 bps bid, 605 bps offered, which was 35 bps to 45 bps better than pricing of 650 bps over Treasuries.

P&G notes trade at pricing levels

The two tranches of notes from Procter & Gamble that priced Tuesday were seen unchanged or slightly tighter, a trader said.

The 3.5% bonds due 2015 were at 168 bps bid, 160 bps offered from the price of Treasuries plus 167.5 bps.

The 4.7% notes due 2019 fared slightly better, tightening to 179 bps bid, 171 bps offered from the Treasuries plus 185 bps price.

Conoco notes popular

A recent issue of 6.5% notes due 2039 from ConocoPhillips were seen topping trading early Thursday afternoon.

Another tranche of this issue, the 5.75% bonds due 2019, was seen doing well in trading, high up on the high-grade volume list.

An outstanding issue of 9.7% notes due 2018 from Altria Group was also popular.

Bank, broker CDS stable to tighter

Bank and broker credit-default swaps were unchanged to slightly tighter late Thursday, a trader said.

Bank names were unchanged to 5 bps tighter, while brokers were stagnant to 10 bps tighter.

America Movil, Exelon big movers

Mexican wireless phone company America Movil SAB de CV and Exelon Corp. were seen as two of the day's biggest movers by late Thursday.

America Movil's 5.5% bonds due 2014 tightened by as much as 50 bps. This may have been tied to the company's net profit increase for the fourth quarter.

The company reported higher revenue as it had a record number of new subscribers across the countries it serves.

Energy company Exelon moved the opposite direction, with its 6.75% notes due 2011 widening about 70 bps from the previous week's levels.

The company was in the news Thursday and in previous days as it delayed more than one nuclear reactor project due to opposition or permit issues.

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