Investment grade market flooded with deals as drought ends; seen as highest daily volume of year

By Andrea Heisinger

Omaha, Aug. 8 - The investment-grade market was looking attractive enough Wednesday for a torrent of new deals to come forth, ending weeks of minimal activity.

"It was a long drought," said one market source. "For two to five weeks there was hardly anything."

Bankers saw a third day of stability this week and decided to unleash new issues that had been pent up for weeks, waiting for better market conditions.

"We all recommended on separate calls that it was a good time to come in," a market source said. "And it was."

Among those with new issues was Kraft Foods Inc. with a $3.5 billion, five-tranche deal and IBM International Group Capital LLC with a $2.6 billion issue of floating-rate notes.

EnCana Corp. had a $500 million issue of notes, Kroger Co. put out $300 million in senior notes, and Citigroup Capital XIX had $1.1 billion of enhanced trust preferred securities.

A trio of utilities had new issues with Public Service Co. of Colorado pricing $350 million in first mortgage bonds, Wisconsin Power and Light Co. pricing $300 million in debentures, and PPL Electric Utilities Corp. pricing $250 million in senior secured bonds.

Merrill Lynch also priced a $2.75 billion sale of five-year notes at Treasury plus 138 basis points.

A recent hold on new issues by many companies meant there was a lot to unleash on the market.

The $15 billion of bonds issued Wednesday was the highest daily volume this year, according to credit analysts at Banc of America Securities LLC, writing in their daily Situation Room report.

Most of the day's 13 major transactions were well received in the market, according to the Banc of America analysts, and heavy supply will likely continue as issuers needing to raise funds notice the solid performance of Wednesday's market.

"Credit markets seem to be reopening to new supply, specifically in the [high-grade] sector" said one market source.

They cited Bear Stearns launching a $2.5 billion deal Tuesday, and said this prompted other high-grade issuance. Other high-rated U.S. names should be expected to come out with new deals in the short term, the source said.

The high-volume day of trading went well, according to a market source.

"Investors had a lot of money to spend," they said.

"It was a pretty good day for new issuances."

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