Monsanto, PSE&G price; Korea Southern to price Friday; slowdown expected to linger for near future

By Andrea Heisinger and Paul Deckelman

Omaha, April 10 - More successful investment-grade issues priced Thursday, including deals from Monsanto Co. and Public Service Electric & Gas Co.

In the investment-grade secondary market Thursday, advancing issues led decliners by a slight margin, while overall market activity, reflected in dollar volumes, fell by about 4% from Wednesday's pace.

Spreads in general tightened, as Treasury yields rose, with the yield on the benchmark 10-year note, for instance, moving out by 6 basis points to 3.54%.

There was brisk upside activity in the newly priced bonds of Monsanto and Public Service Electric & Gas, as well as firming in such new issues as Wal-Mart Stores, Inc. Several other recently priced credits, like Verizon Communications and Citigroup, were also seen firmer.

In the credit-default swap market, Time Warner Inc.'s debt-protection costs widened out by around 15% on news that it may combine its AOL internet business with that of Yahoo! Inc., paying an as-yet undisclosed cash price for a 20% stake in the combined company.

Monsanto at tight end

Monsanto priced $550 million of senior notes in two tranches.

The $300 million tranche of 5.125% 10-year notes priced at 99.675 to yield 5.167% with a spread of Treasuries plus 165 basis points.

The $250 million tranche of 5.875% 30-year notes priced at 98.53 to yield 5.987% with a spread of Treasuries plus 165 bps.

Both tranches came in at the tight end of price talk of 165 to 170 bps, a source close to the deal said.

Another source said there was whispered talk of 175 bps.

Bookrunners were Citigroup Global Markets Inc., Goldman Sachs & Co., J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Inc.

The books were closed on the issue after a half hour, a source said, adding that the order books were several times oversubscribed.

"It's an infrequent issuer, which helps," he said. "It was a little surprising they came 10 bps inside talk."

PSE&G sells $400 million

PSE&G priced $400 million of 5.3% 10-year medium-term notes at 99.92 to yield 5.31% with a spread of Treasuries plus 178 bps.

RBS Greenwich Capital, Scotia Capital and BNP Paribas were bookrunners.

Kospo talks notes

Price guidance was announced for Friday's expected issue from Korea Southern Power, a market source said.

The company is talking $300 million of five-year notes at Treasuries plus 220 bps area.

The issue is expected to price in the morning.

Deutsche Bank Securities Inc., Citigroup and ABN AMRO are bookrunners.

Friday will likely be quiet save for this deal pricing, sources said.

Volume hopes dashed

Estimates of a busy week were mostly wrong. Although there has been a steady flow of issues, it has been nothing like the last couple of weeks.

"It's been kind of slow," a source said. "People were talking bigger, but I think it was kind of a false reading. A lot of the major financials are still in a blackout. There will be nothing substantial coming out for the next couple of weeks."

New Monsanto, PSE&G firm

A trader saw both tranches of the new Monsanto bonds having firmed by about 5 bps over comparable Treasuries, with the 5.125% notes due 2018 quoted at 160 bps bid, 157 bps offered and the 5.875% bonds due 2038 at 160 bps bid, 158 bps offered, both versus a spread at pricing of 165 bps.

PSE&G's 5.30% notes due 2012, which had priced at 178 bps over, came in by about 10 bps, he said, to 168 bps bid, 166 bps offered.

Wal-Mart back on the upside

Wal-Mart's bonds - which had initially firmed smartly after their pricing Tuesday, only to give back most of those gains on Wednesday - were back on the upside Thursday. The 4.25% notes due 2013 narrowed back down to 147 bps bid, 144 bps offered from Tuesday's 160 bps over pricing spread, while its 6.20% bonds due 2038 tightened to 178 bps bid, versus 188 bps at pricing.

However, the trader described Duke Energy Carolinas LLC's 5.10% notes due 2018 as "in maybe 1 bp" from Wednesday's 165 bps spread at pricing.

Verizon, Citi seen firmer

Among other recently priced issues, a market source saw Verizon Communications' 6.9% notes due 2038 trading at 222 bps bid, well in from the 260 bps over spread at which they had priced on April 1.

Citigroup's new 5.5% notes due 2013, which priced at 290 bps over on April 7, here quoted around the 240 bps area on Thursday.

Spectra Energy Capital, whose 6.2% notes due 2018 priced at a spread of 265 bps over on April 7, had narrowed to 252 bps bid by Thursday afternoon.

Time Warner CDS wider on Yahoo! news

In the credit-default swap spread market, the cost of protecting Time Warner's debt was seen up by about 20 bps to about 156 bps bid, or, almost 15% higher, on a five-year contract, pushed upward by news reports that the giant New York-based media conglomerate is in talks with embattled Yahoo! on combining its own AOL internet operations with those of Yahoo!, which has been looking for a white knight to fend off Microsoft Corp.'s unwanted takeover effort.

The reports say that such a deal would fold the AOL business - excluding AOL's legacy dial-up internet access operations - into a new company in combination with Yahoo. They quoted sources close to the negotiations as saying that Time Warner, which values the AOL business at about $10 billion, would make a cash investment - size yet undisclosed - in return for a 20% stake in the combined AOL-Yahoo company.

Financial CDS spreads widen

Among the financial names, meantime, a trader saw the cost of insuring major-bank names about 1 bp to 5 bps wider, with Washington Mutual Inc. out by 10 bps to 370 bps bid, 390 bps offered.

He saw brokerage CDS costs push out between 5 bps and 20 bps, with Lehman Brothers Holdings 20 bps wider at 210 bps bid, 230 bps offered.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.