TransCanada, Northern Trust, Public Service of Colorado price as primary holds firm; Vulcan wider on earnings

By Andrea Heisinger

New York, Aug. 6 - The new issue market picked up Wednesday in response to improved conditions, which Public Service Co. of Colorado, TransCanada Pipelines Ltd. and Northern Trust Corp. took advantage of.

The market open was good enough for each of these companies to get a deal done. Negative earnings headlines from Freddie Mac and others followed.

"They probably figured it was as good of a time as any," a source said.

The secondary market also saw some movement, some good and some bad, on the various earnings announcements.

Vulcan Materials Co. was the day's biggest loser, widening 25 basis points in reaction to its second quarter earnings.

Industrials, utilities continue new issue domination

Industrial and utility issuers remained the majority of those entering the market as some financials remain in blackout.

A source said this will likely continue, at least for the rest of this week.

TransCanada priced an upsized $1.5 billion of notes in two tranches.

The $850 million of 6.5% 10-year notes priced at 99.926 to yield 6.51% with a spread of Treasuries plus 245 bps. This was at the tight end of talk of 245 to 250 bps.

The $650 million of 7.25% 30-year notes priced at 99.962 to yield 7.253% with a spread of Treasuries plus 255 bps. This was also at the tight end of talk of 255 to 260 bps.

The size of the issue was increased from $1 billion.

Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. ran the books.

Also pricing an upsized issue was Northern Trust, increasing its deal from one to two tranches.

The $400 million of 5.5% five-year notes priced at 99.611 to yield 5.59% with a spread of Treasuries plus 228 bps.

The $300 million of 6.5% 10-year notes priced at 99.854 to yield 6.52% with a spread of Treasuries plus 248 bps.

Merrill Lynch & Co., Inc. and UBS Investment Bank were bookrunners.

Another two-tranche issue came from Public Service Co. of Colorado, pricing $600 million of first mortgage bonds.

The $300 million of 5.8% 10-year bonds priced at 99.853 to yield 5.82% with a spread of Treasuries plus 175 bps.

The $300 million of 6.5% 30-year bonds priced at 99.598 to yield 6.531% with a spread of Treasuries plus 185 bps.

Thursday seen slower on supply

Despite a lull in new issues Tuesday due to the Federal Reserve meeting, new deals are likely to wane rather than catch up as the week draws to a close, a source said.

"I don't know how much more is left out there to price," he said. "We could maybe see one or two, but I think today was a window that might not be open again."

Some negative earnings reported late Wednesday from the likes of insurance company American International Group also may discourage potential issuers, he added.

The company reported a more than $5 billion loss in the second quarter due to write downs.

Public Service tightens in trading

After pricing, the Public Service Co. of Colorado notes were seen about 5 to 7 bps tighter, a source said.

The 5.8% 10-year notes were at 170 bps bid after pricing at 175 bps, while the 7.25% 30-year notes were at 178 bps bid after pricing at 185 bps.

The TransCanada notes were mostly unchanged after pricing.

The 6.5% 10-year notes were at 244 bid, tightening slightly from the 245 bps pricing. The 7.25% 30-year notes moved similarly, seen at 254 bps bid from 255 bps pricing.

Vulcan widens on earnings

Asphalt and rock supplier Vulcan Materials' bonds were "a lot wider" after the company posted a decline in profits in the second quarter.

Profits were down to $140.8 million from $142.0 million a year earlier. The company blamed lower volume and higher energy costs for the decline.

One secondary source said they saw the company's bonds about 25 bps wider.

Other companies reporting earnings had moves that weren't so dramatic.

Time Warner Inc.'s earnings fell about 26% on declining America Online subscribers and a Time publishing drop in revenue.

"They were trying to do better, but there was not much movement," a secondary source said. "I think at one point they were maybe 5 [bps] better, but that was all."

The day in general was light in trading, a source said.

"We were a little lighter in flows today," he said. "There's not much happening.

Offshore drilling company Transocean Inc. was one of the few investment-grade companies reporting positive earnings for the second quarter.

The company reported an earnings increase to $1.1 billion, moving its bonds a few basis points tighter, a source said.

Its earnings nearly doubled over a year earlier due to the buyout of smaller competitor GlobalSantaFe Corp.

Confidence boost in financials, CDS spreads tighten

Credit-default swaps for major bank and brokerage names were about 10 bps better across the board, a trader said Wednesday. They equated this to continued renewal of investor confidence in the financial sector.

Lehman Brothers' debt protection costs were lower at 260 bps bid, 270 bps offered, the source said. Merrill Lynch & Co. declined to 235 bps bid, 245 bps offered and Morgan Stanley & Co., Inc. also were seen narrowed to 200 bps bid, 206 bps offered.

Troubled name Washington Mutual Inc.'s CDS was seen about 60 bps lower.

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