Prudential, Nordstrom, Nucor, duPont, EnCana, Kellogg among more than $8.2 billion in new issues

By Andrea Heisinger and Paul Deckelman

Omaha, Nov. 28 - The floodgates opened Wednesday on the backlog of new issues, with Nucor Corp., Prudential Financial, Nordstrom, Inc., Pacific Gas & Electric Co., Manufacturers & Traders Trust Co., Rockwell Automation, Inc., Kellogg Co., E.I. duPont de Nemours & Co., and EnCana Corp. pricing.

Many of these have been waiting to bring deals and were encouraged by the success of Tuesday's issuers, sources said.

With the parade of new offerings hitting the market, Wednesday's secondary activity was dominated by aftermarket dealings in the new paper.

Among established issues, there was considerable activity in Coca-Cola Co.'s 5.35% bonds - which a trader chalked up to market players wanting to sell out of older issues in order to raise capital to get into the new paper.

Market participants meantime continued to analyze Citigroup's big announcement Tuesday of a major capital infusion - and at least one large bank is counseling investors to proceed warily.

Nucor brings $1.3 billion

Nucor priced an upsized $1.3 billion of notes in three tranches. The issue was planned at $750 million.

The $300 million tranche of 5% five-year notes priced at 99.543 to yield 5.105% at a spread of Treasuries plus 160 bps. This was at the tight end of 160 to 165 bps price talk.

The $600 million tranche of 5.75% 10-year notes priced at 99.558 to yield 5.809% at a spread of Treasuries plus 177 bps. This was tighter than price talk that was 180 bps.

The $400 million tranche of 6.4% 30-year notes priced at 99.617 to yield 6.429% at a spread of Treasuries plus 200 bps. This was at the tight end of price talk that was 200 to 205 bps.

Bookrunners were Banc of America, Citigroup and J.P. Morgan.

PG&E sells $500 million

The PG&E $500 million issue of 5.625% 10-year senior notes priced at 99.458 to yield 5.697% at a spread of Treasuries plus 167 bps. Bookrunners were BNP Paribas, J.P. Morgan and Morgan Stanley.

Prudential Financial priced $1.5 billion of medium-term notes in two tranches.

The $750 million tranche of 6% 10-year notes priced at 99.356 to yield 6.087% at a spread of Treasuries plus 205 bps.

The $750 million tranche of 6.625% 30-year notes priced at 99.177 to yield 6.689% at a spread of Treasuries plus 225 bps.

Nordstrom also priced a two-tranche issue, totaling $1 billion.

The $650 million of 6.25% notes due 2018 priced at 99.388 to yield 6.331% at a spread of Treasuries plus 230 bps, which was equal to price guidance.

The $350 million of 7% notes due 2038 priced at 97.812 to yield 7.177% at a spread of Treasuries plus 275 bps, also equal to price guidance.

Bookrunners were Banc of America, Goldman Sachs and Morgan Stanley.

The Manufacturers & Traders issue was upsized to $400 million from $300 million.

It came as 6.625% 10-year notes priced at 99.776 to yield 6.656% at a spread of Treasuries plus 262.5 bps.

Bookrunners were Citigroup and UBS Investment Bank.

Another two-tranche issue came from Rockwell Automation, with $500 million total.

The $250 million tranche of 5.65% 10-year notes priced at 99.849 to yield 5.67% at a spread of Treasuries plus 165 bps.

The $250 million tranche of 6.25% 30-year notes priced at 99.384 to yield 6.296% at spread of Treasuries plus 190 bps.

Bookrunners were Banc of America, Goldman Sachs and UBS Investment Bank.

Kellogg's upsized $750 million

Kellogg Co. had an upsized issue of $750 million in 5.125% five-year senior notes priced at 99.965 to yield 5.133% at a spread of Treasuries plus 165 bps. It was increased from a planned $500 million.

Bookrunners were J.P. Morgan, Barclays and SunTrust Robinson Humphrey.

The duPont issue was also upsized, to $750 million from $500 million in 5% notes due 2013 priced at 99.782 to yield 5.047% at a spread of Treasuries plus 158 bps. The bookrunners were Banc of America and Credit Suisse.

Another issue came from EnCana with $1.5 billion in two tranches.

The $700 million tranche of 5.9% 10-year notes priced at 99.829 to yield 5.923% at a spread of Treasuries plus 190 bps.

The $800 million tranche of 6.5% 30-year notes priced at 99.769 to yield 6.516% at a spread of Treasuries plus 210 bps.

Bookrunners were Citigroup and UBS Investment Bank.

Delmarva postpones

Delmarva Power & Light Co. announced an issue of $150 million in 10-year notes and then just as quickly postponed it.

Market sources said they weren't sure why it was postponed.

Proceeds were earmarked to repay the utility's existing short-term debt.

Bookrunners were Keybanc Capital Markets and SunTrust Robinson Humphrey.

Barclays plans preference shares

Another deal announced Wednesday was from Barclays Bank plc.

It announced an issue of non-cumulative preference shares priced at $25 per share, which will be callable beginning in 2013.

The issue is expected to price Thursday, an informed source said, and added it launched at the standard $300 million.

Bookrunners are Barclays, Citigroup, UBS and Wachovia.

Tuesday's gains draw issuers

Conditions did not deteriorate overnight from Tuesday, which helped push issuers to come to the market, a source said.

"Everything that priced yesterday [Tuesday] tightened today and there was strength overnight in the equity market," he said.

"There was no bad credit news, which also helped."

The 10-year Treasury was at 4.02% from 3.85% Tuesday, but it didn't affect much, a market source said.

"You can bet that all of these that came today paid a hefty new issue premium," the source said.

The souce cited Prudential, comparing the spread of 225 bps on the 30-year tranche to an outstanding 30-year from the company that was trading at 180 bps.

None of Wednesday's issues, which likely came from a backlog of the last couple of weeks, had to come to the market, a source said.

"There are really two reasons they're issuing," the source said. "They're probably being told, and believe, the spreads have the potential of going wider, and then you have the Treasury rally of 125 to 130 bps."

The issue from Anheuser-Busch that priced Tuesday likely had about a 40 bps new issue premium, the source said, and Barclays probably paid about the same for its issue.

Thursday seen busy

There will be more issues Thursday, but likely not as high of volume as Wednesday.

One source said he knew of three issues set to price Thursday.

"We won't see as many names as today. But as long as there's follow through and nothing happens overnight we'll see more," a market source said.

New deals gain

A trader said that the new deals were coming down the chute "one after another" - and with the corporate bond market rising in tandem with the big stock rally, most of the new issues were seen having tightened, some significantly.

He saw Kellogg's new 5 1/8% senior notes due 2012 "trading up a little bit," tightening to 157 basis points over comparable Treasuries, versus their 165 bps issue price. Meanwhile, the DuPont 5% notes due 2013% narrowed to 148 bps bid, 144 bps offered versus their 158 bps issue price.

He saw EnCana's 5.90% 10-year notes tighten to 183 bps bid, 175 bps offered from 190 bps at issue, while its 6½% bonds due 2038 whittled down to 201 bps bid, 197 bps offered versus a 210 bps spread at issue.

However, not all of the newly issued bonds tightened quite that much. He saw NuCor's five-year, 10-year and 30-year paper all narrow about 2 bps from issue, to 158 bps, 175 bps and 198 bps, respectively.

And he said the Pacific Gas & Electric bonds "were the only ones that didn't do anything," holding to their 167 bps issue spread.

Among the issues which priced on Tuesday, Anheuser Busch's 5½% notes due 2018 tightened 10 bps from issue to 150 bps bid, 148 bps offered, while Dominion Resources' 10-year bonds narrowed to 204 bps bid, 201 bps offered from 210 bps at issue.

But the trader dismissed the notion that the sudden flood of new issues represented some big improvement in the recently beleaguered market psychology - instead, he said, the issuers "are rushing to get their deals done" before the end-of-year holiday lull," so they're pricing them extremely cheaply."

He noted that the established Anheuser Busch 10-year bond was recently trading as tight as 120 bps bid, 110 bps offered - but the issue which priced on Tuesday was initially talked as wide as 175 bps, before finally coming to market at 160 bps.

The issuers, he reiterated, "just want to get these deals done."

Coke bonds fizzle, not sizzle

Among established names, a market source saw Coca-Cola's actively traded 5.35% notes due 2017 open the day about 10 bps wider at 115 bps, and then tighten to levels as low as 78 bps - although that price spike proved to be extremely short-lived, with the bonds once again widening back to around their opening levels by mid-afternoon and finishing the day there.

There was no immediate news seen out on the giant Atlanta-based soft-drink manufacturer that might explain the busy dealings in the credit.

The first trader noted that the Cokes had been as tight as 105 bps bid, 99 bps offered "just a couple of days ago," but then "got beat up" Wednesday to widen out to 115 bps bid, 113 bps offered in busy dealings.

He said he saw no news on the company - rather he said, market participants were "selling out of the outstanding bonds so they could buy the new issues and then flip them."

With the year-end fast approaching, "they're jockeying around their portfolios right now."

B of A bearish on Citi

With the market focus solidly on the new deals, most of them non-financial issuers, the spotlight temporarily moved away from the important financial sector.

But players continued to mull over the implications of Citigroup's news that it had sold a 4.9% stake to the Persian Gulf oil nation of Abu Dhabi. While that news helped put a bid in the market on Tuesday, not everyone necessarily thinks it is a good idea.

Banc of America Securities for instance reiterated its "sell recommendation" on Citigroup debt, such as its 6 1/8% notes due 2017 and its 5 5/8% notes due 2012, declaring that the $7.5 billion equity infusion by the Abu Dhabi Investment Authority announced Tuesday is "no panacea."

In a research note late Tuesday, analysts Stan August and Bryan Cook said that while the money helps to address Citi's financial flexibility problems "to some extent," the largest U.S. banking concern still has a vault full of other problems, and its credit spreads are likely to underperform those of its sector peers in either a widening or a tightening market environment.

Not the least of those worries, they noted, was that Citi was the only major bank needing to raise its Tier 1 capital levels - and it had to pay a price to do so, an 11% coupon, which the analysts called "onerous." They said that this would put the New York-based banking giant at a competitive disadvantage, particularly if it has to raise more capital at presumably similar costs, since its rivals, should they too need to raise capital, "could do so at much more attractive levels."

The analysts further cautioned that additional markdowns of subprime exposures, the need to consolidate Citi's structured investment vehicles or other conduits onto its balance sheet and the cost of funding its leveraged loan commitments could all erode the company's Tier 1 capital balance and force it to seek additional funds. They therefore advised investors to not view the Abu Dhabi money as providing any kind of long-term flexibility, but rather to regard it more as just a stopgap measure "shoring up Citi's balance sheet"

CDS spreads seen tighter

Among banking names, a trader said, their credit-protection costs were pretty much 1 bp to 2 bps tighter across the board, with Citigroup at 80 bps bid, 87 bps offered, Bank of America at 62 bps bid, 69 bps offered, JP Morgan at 60 bps bid, 67 bps offered, Wachovia at 95 bps bid, 102 bps offered and Wells Fargo at 62 bps bid, 69 bps offered. Washington Mutual's CDS cost was steady at 430 bps bid, 450 bps offered, while Fannie Mae and Freddie Mac were each slightly tighter at 51 bps bid, 56 bps offered.

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