AT&T, Alabama Power, Travelers, Korea Rail, Gerdau price; issuers take advantage of tight spreads

By Andrea Heisinger

Omaha, May 8 - The new issues continued to flow Thursday with AT&T Corp., Alabama Power Co., Travelers Cos., Inc., Korea Railroad Corp., Gerdau SA and Toyota Motor Credit Corp.

AT&T priced $3 billion global notes in three tranches.

The company reopened its 4.95% five-year notes to add $750 million.

The notes priced at 101.270 with a spread of Treasuries plus 168 basis points.

Total issuance is now $2.5 billion including $750 million priced Jan. 29 and $1 billion priced Dec. 3, 2007.

The company also priced $1 billion of 5.6% 10-year notes at 99.916 with a spread of Treasuries plus 185 bps, and $1.25 billion of 6.4% 30-year notes at 99.616 with a spread of Treasuries plus 190 bps.

The 10-year notes carried around a 12 bps new issue premium, a source said, with about 30 bps paid on the long bond.

Bookrunners were Banc of America Securities LLC, Deutsche Bank Securities Inc., Morgan Stanley & Co. Inc. and UBS Investment Bank.

Alabama Power brings $300 million

Alabama Power priced $300 million 6.125% 30-year senior notes at 99.741 to yield 6.144% with a spread of Treasuries plus 155 bps.

Citigroup Global Markets Inc. and Lehman Brothers Inc. were bookrunners.

Travelers priced $500 million 5.8% 10-year senior notes at 99.909 to yield 5.812% with a spread of Treasuries plus 200 bps.

They came in at the tight end of price talk of 200 to 203 bps, a source close to the issue said.

Goldman Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Inc. ran the books.

The issue was oversubscribed about four times.

"It went well," a source said. "It priced down to the tight end and we had good results."

Two EM deals

Korea Railroad priced $300 million 5.375% five-year senior bonds at 99.637 to yield 5.459% with a spread of Treasuries plus 237.7 bps.

Citigroup, HSBC Securities Inc. and Morgan Stanley & Co. Inc. were bookrunners.

Brazil's Gerdau reopened its 7.25% 10-year notes to add $500 million.

They priced at 102.265 to yield 6.875% with a spread of Treasuries plus 309 bps.

ABN Amro, HSBC and J.P. Morgan Securities Inc. were bookrunners.

Toyota Motor Credit priced $250 million one-year medium-term floating-rate notes at par to yield one-month Libor flat.

HSBC was agent.

The company also announced terms for a $400 million issue of floaters from Wednesday.

They priced at par to yield the Federal Funds rate plus 30 bps.

Deutsche Bank was agent.

Another issuer from Wednesday also announced terms.

Colgate-Palmolive Co. priced $75.436 million medium-term floating-rate notes.

They have a 40-year maturity and coupon of three-month Libor minus 30 bps.

Agents were UBS, Morgan Stanley, Deutsche Bank, Merrill Lynch and J.P. Morgan.

Citigroup Funding Inc. announced terms for its $2.5 billion issue of floaters.

The two-year notes priced at par with a coupon of three-month Libor plus 105 bps.

Citigroup was agent.

Public Service talk

Price talk was released for the upcoming split-rated issue from Public Service Co. of New Mexico.

The $350 million of 10-year notes are being talked in the 8% area.

This issue is part of a larger one by operating company PNM Resources, which is pricing a junk-rated $350 million tranche.

CDS edges wider

Thursday was another good day for issuers, sources said.

CDS costs were slightly wider, one market source said. Major bank or brokerage paper was seen plus or minus 1 bps, according to a source.

A source who works with preferred issues said there was better buying out of retail Wednesday, with Thursday's open mostly unchanged with a firm tone to start.

It was again a constructive issuing environment, a source said.

"There were a lot of people who are taking advantage of the rally," he said. "They partly just want to get in while the spreads are good. We also have a lot of capital raisers."

More deals possible Friday

Friday may see some action, as sources have said opportunistic issuers will continue to take advantage of market conditions.

"We'll see a few new deals," a source said. "We're going to end the week with some sizable issuance."

The secondary market was again quiet as the focus was on the primary market.

New deals continue to tighten

Alabama Power was seen unchanged after pricing, a secondary source said.

Wednesday's issue of 4.2% five-year notes from Colgate-Palmolive priced at Treasuries plus 107 bps, and was seen Thursday afternoon at a 101 bps bid.

Things continue to go tighter after pricing, the source said.

An outstanding 10-year note from AT&T was seen at Treasuries plus 173 bps, while an outstanding 30-year was seen at plus 160 bps.

The ConocoPhillips Co. 5.2% 10-year notes that priced Monday at Treasuries plus 135 bps were seen at plus 115 bps in another instance of continued tightening.

The 5.9% 30-year notes from the issue, on the other hand, were seen at Treasuries plus 136 bps, versus plus 135 bps pricing.

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