Lubrizol, Jersey Central P&L sell notes, Tennessee Gas Pipeline prices split-rated deal

By Andrea Heisinger and Paul Deckelman

New York, Jan. 22 - The slow pace of issuance in the high-grade primary continued Thursday with bond sales from Lubrizol Corp. and Jersey Central Power & Light Co.

A split-rated issue from Tennessee Gas Pipeline also was priced.

In the secondary sphere on Thursday, a market source said the widely followed CDX Series 11 North American high-grade index was little changed, tightening by just 1 basis point on the day to a mid bid-asked spread level of 215 bps from 216 bps on Wednesday.

Advancing issues continued to trail decliners, who kept their advantage of almost three to two. Overall market activity, reflected in dollar volumes fell about 5% from the levels seen on Wednesday.

Spreads in general were seen a little narrower, in line with higher Treasury yields; for instance, the yield on the benchmark 10-year issue was 6 bps higher at 2.59%.

The latest big news shaking the financial sector - the ouster of former Merrill Lynch & Co. CEO John Thain from Bank of America and the selection of former Time Warner Inc. boss Richard Parsons to take over as chairman at Citigroup - seemed to have little impact on those companies' bonds, a trader said.

Meantime, the day's new issues, like Jersey Central Power & Light and Lubrizol were seen having tightened up in aftermarket dealings, as did deals from earlier in the week Duke Energy Corp. and Electricite de France.

Lubrizol upsizes deal

Specialty chemical company Lubrizol upsized its $500 million issue of senior notes Thursday, a source close to the issue said.

The size was originally $400 million, he said.

The 8.875% notes priced at 99.256 to yield 8.989% with a spread of Treasuries plus 640 bps.

They came in just below price talk of a 9% yield, the source said.

"It went very well," he said. "It was six times oversubscribed."

Citigroup Global Markets Inc., Deutsche Bank Securities and J.P. Morgan Securities Inc. were bookrunners.

Jersey Central sells $300 million

FirstEnergy Corp. subsidiary Jersey Central Power & Light priced $300 million 7.35% 10-year senior notes at 99.873 to yield 7.368% with a spread of Treasuries plus 475 bps.

The size did not change from what was originally announced in a Securities and Exchange Commission filing.

Morgan Stanley & Co., RBS Greenwich Capital, UBS Investment Bank and Wachovia Capital Markets were bookrunners.

Tennessee Gas prices split-rated bonds

Tennessee Gas Pipeline sold a $250 million issue of split-rated senior notes Thursday.

The notes (Baa3/BB) were sold under Rule 144A.

They had a coupon of 8% and priced at 94.881 to yield 9%.

The deal priced at the tight end of talk, which was 9% to 9.25% yield.

Deutsche Bank, Credit Suisse Securities, Banc of America Securities LLC and RBS Greenwich Capital ran the books.

EDF terms given

Terms for the $5 billion, three-tranche issue, from Electricite de France that priced under Rule 144A/Regulation S late Wednesday were given Thursday.

The $1.25 billion of 5.5% five-year notes priced at 99.603 to yield 5.592% with a spread of Treasuries plus 400 bps.

The $2 billion of 6.5% 10-year notes priced at 99.688 to yield 6.543% with a spread of Treasuries plus 400 bps.

The $1.75 billion of 6.95% 30-year notes priced slightly inverted at 98.551 to yield 7.067% with a spread of Treasuries plus 387.5 bps.

According to a news release, it was the first time EDF did a bond issue in the U.S. market.

The issue was nearly two times oversubscribed, with about 300 orders totaling $9 billion, according to the release.

"There has been large demand for this operation in the United States," it says in the release.

The success of the issue will enable EDF to diversify its sources of financing.

"Together with the [EDF's] recent issues in Europe, this operation will help to finance its strategy and contribute to the early repayment of its bank loan for the acquisition of British Energy, reducing its initial amount by half," according to the release.

Tone stays down on worries

Thursday marked a continuation of worries about banks and the economy in general, a source said, as the former head of Merrill Lynch, John Thain, stepped down from his new post at Bank of America.

As the day unfolded, conditions didn't necessarily worsen, but they didn't get much more inviting for potential issuers.

"It was kind of a down day," a source said. "We figured there wouldn't be a bunch of new issues, and that's what happened."

The pace that started off the week continued, with a couple of new deals entering the market.

Friday will not likely offer a reversal of that trend.

"We would need a lot to get to last week's total," a source said. "That's probably not going to happen unless there's something out there no one knows about."

The week is "a done deal," one source said. "It was a short week that didn't start off great."

With some issuers in earnings blackout, it may be that others are simply waiting until next week when they have five days to work with, the source said.

Day's new issues firm up

In the secondary market, a trader saw Jersey Central Power & Light's new 7.35% notes due 2019 trading at a spread over comparable Treasury issues trading at 457 bps bid. 450 bps offered. The utility operator had earlier priced $300 million of the bonds at 475 bps over.

In that same vein, Lubrizol's upsized $500 million offering of 8.875% notes due 2019 tightened in to 605 bps bid, 595 bps offered, versus 640 bps over at the pricing.

Wednesday deals trade higher

The same was true of the bonds which had priced on Wednesday, such as Duke Energy's $750 million of 6.30% notes due 2014. That deal for the power provider had priced on Wednesday at 475 bps over, although the new bonds had tightened in their initial aftermarket activities to around 455 bps bid.

On Thursday, a trader saw them getting even better, at 435 bps bid, 425 bps offered.

Electricite de France's three-part mega-deal was also seen up solidly. Its $1.25 billion of 5.5% notes due 2014, which had priced at 400 bps over, had improved nicely to about 340 bps over.

The company's $2 billion of 6.50% notes due 2019, which had also priced at 400 bps over, firmed to 375 bps bid, 370 bps offered.

And its $1.75 billion of 6.95% bonds also traded at 375 bps bid, 370 bps offered, although that was in somewhat more slightly from its 387.5 bps issue spread.

The trader also said he had not seen any trace of the new Puget Sound Energy 6.75% notes due 2016, which priced on Tuesday at 480.3 bps over. Noting that the deal was only for $250 million, he opined that it was "pretty small - it must have been picked up and put away."

Financials 'sloppy,' but trading restrained

Among the financial issues, another trader said that overall, the sector was "a little sloppy," but he said that "nothing specific" stood out.

"Bonds kind of hung in, and maybe they grinded a little higher, but I think the overall theme was sloppy."

He said that despite the headlines attached to the personnel changes at B of A and Citi, "they haven't really moved much." Here too, he said that "if anything, they grinded a little higher. But there was nothing of note."

At another desk, a market source saw B of A's 3.125% FDIC-backed notes due 2012 having firmed to about the 72 bps level from 80 bps on Wednesday, in fairly active dealings of over $20 million. The banking giant had sold $6.75 billion on Dec. 1 at 201 bps over, then following that up with another $1.5 billion, which priced at 150 bps over on Dec. 15.

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