AIG, Energizer price modest deals as others wait; bank, financial paper improves 'a hair'

By Andrea Heisinger and Cristal Cody

New York, May 21 - The high-grade bond market had a tepid start to the week Monday with two new corporate deals from American International Group, Inc. and Energizer Holdings, Inc.

Inter-American Development Bank announced and priced a $1.5 billion sale of triple-A rated notes due 2015. The full terms of the deal were not available at press time.

AIG's deal was $750 million of 10-year paper. This was a follow-up to the insurance company's $2 billion sale in two parts at the end of March.

Energizer priced $500 million of 10-year bonds after the offering was increased from $400 million.

The primary side of the market is expected to be somewhat subdued this week due to the Memorial Day holiday and long weekend.

"It wasn't terrible [today], but I wouldn't say it was great," a syndicate source said. "Not a lot of supply. The deals were out for a reason."

The market is said to be "not totally dead" in the next couple of days.

"We're going to have less supply than a $20 billion to $25 billion week," a syndicate source said. "We're still going to have people looking on Tuesday, Wednesday and Thursday."

There were at least a couple of companies looking to price bonds on Monday that opted to stand down, the source said.

"The tone was OK, but I think they wanted a couple of days to make sure [the tone] wasn't like last week."

Corporate bond spreads traded better on Monday after widening last week.

The Markit CDX Series 18 North American Investment Grade index firmed 5 basis points to a spread of 118 bps.

Energizer's bonds traded flat in the late afternoon.

No active markets were immediately seen in AIG's notes due 2022 or the notes due 2015 from IADB.

Bank and financial paper improved "a hair" on Monday after losses over the past month.

"Financials seemed to widen a little bit every single day," a trader said. "When JPMorgan [Chase & Co.] announced their losses, there really wasn't much of an immediate reaction, but ever since that date, we've gone a little wider in spreads every single day on financial names."

Market observers also are nervously awaiting the outcome of Moody's Investors Service's potential downgrades of the big banks. Moody's placed 17 global financial firms on downgrade watch in February.

"We're waiting to see how big that will be. Morgan Stanley is rumored to drop as many as three levels," a bond source said. "Just getting that event past us would help stabilize the financial names."

Morgan Stanley's benchmark issue improved about 2 bps in trading on Monday.

Bank paper active in the session included Morgan Stanley, JPMorgan, Prudential Financial Inc. and a "lot of GE today," a source said. "We still are trading the financial names quite a bit. People are a little nervous, but by the same token, people seem to reach for yield."

General Electric Capital Corp.'s bonds traded mostly unchanged from Friday.

"GE has widened a little bit in sympathy with the whole situation in financials but not very much because of the good news coming out of GE," a bond source said.

GE Capital said last week it will pay a $4.5 billion special dividend to its parent company and has declared a $475 million quarterly dividend for the second quarter. The company had suspended dividends in 2009.

Treasuries ended mixed on Monday. The benchmark 10-year note yield rose 2 bps to 1.74%. The 30-year bond yield ended flat at 2.8%.

AIG sees modest demand

American International Group sold $750 million of 4.875% 10-year senior notes (Baa1/A-/BBB) at a spread of 325 bps over Treasuries, an informed source said.

The bonds were priced at the tight end of guidance in the low 300 bps area, the source said. There was about $1.1 billion of demand on the books.

Barclays Capital Inc., BNP Paribas Securities Corp., Citigroup Global Markets Inc. and RBC Capital Markets LLC were the bookrunners.

Proceeds are being used for general corporate purposes including repayment of debt maturing in 2013.

AIG was last in the market with a $2 billion offering of notes due 2015 and 2017 on March 19.

The insurance company is based in New York.

Energizer upsizes

Energizer Holdings sold $500 million of 4.7% 10-year senior notes (Baa3/BBB-/) to yield Treasuries plus 300 bps, a market source said.

The deal size was increased from $400 million, the source said.

Bank of America Merrill Lynch, Goldman Sachs & Co. and J.P. Morgan Securities LLC were the bookrunners.

Proceeds are being used for debt repayment and general corporate purposes. This could include repaying $100 million of private placement notes due June 2012, debt under a receivables securitization program or debt under a $444.5 million term loan.

The bonds are guaranteed by existing or future subsidiaries that guarantee credit agreements or other borrowed money.

The notes from Energizer Holdings, seen as an "interesting investment-grade name," traded flat in late-afternoon trading, a trader said.

The manufacturer and marketer of batteries, lighting and personal care products is based in St. Louis.

Morgan Stanley still cheaper

Morgan Stanley's 5.5% notes due 2021 traded going out about 2 bps better on the day at 488 bps bid, 480 bps offered, a trader said.

"This morning, Morgan Stanley was at 490 [bps], and three weeks ago it was at 390 [bps]," the trader said. "This may be the first day it's actually tightened a basis point or two, but that's a relatively small tightening compared to how much they've cheapened up."

The issue (A2/A/A) priced in a $1 billion offering on Oct. 27, 2011 at a spread of 335 bps over Treasuries.

The investment bank is based in New York.

GE Capital flat

General Electric Capital's 2.3% notes due 2017 traded unchanged on the day at 180 bps bid, a trader said.

The issue has widened along with other financial paper.

GE Capital sold $2 billion of the notes (A1/AA+/) on April 24 at a spread of Treasuries plus 150 bps.

Also in trading, the 4.65% notes due 2021 were seen at 190 bps, wider than the 180 bps spread at the start of the month, the trader said.

The issue (Aa2/AA+) was reopened on Jan. 4 in a $1 billion offering priced at Treasuries plus 240 bps.

The financial products and services provider is based in Norwalk, Conn.

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