Blackstone Holdings sells first bond; Cleveland Electric, Raymond James price; trading slows

By Andrea Heisinger

New York, Aug. 13 - A smattering of small investment-grade bond offerings priced Thursday, including those from Blackstone Holdings Finance Co. LLC, Cleveland Electric & Illuminating Co. and Raymond James Financial, Inc.

The primary continued to take a breather after heavy issuance in the top half of the week.

New deals were mostly lackluster in trading, with the Cleveland Electric notes unchanged. The first bond offering from Blackstone tightened modestly once it hit trading, while the Raymond James notes were not freed for the secondary, a source close to the sales said.

The recently priced 10-year notes from media and entertainment company Discovery Communications LLC made one of the only solid moves of the day.

A trader said the secondary market remained sluggish as accounts take vacations and the new deals are mostly small amounts.

Spreads moved largely wider by late afternoon as Treasury yields contracted, a source said. The 30-year bond was 12 basis points tighter than the previous day, at 4.42%. The five- and 10-year notes made similar moves.

Blackstone sells 10-year

Blackstone Holdings Finance priced $600 million 6.625% 10-year senior notes at Treasuries plus 312.5 bps, an informed source said.

It was the first bond sale from the subsidiary of asset management and financial services company The Blackstone Group, LP, the source said.

The notes were initially talked at 325 bps to 350 bps, the source said, which was later revised and lowered to 312.5 bps to 325 bps.

It went overnight to allow investors from Europe and Asia in, the source said. There were more accounts on the books from Asia.

"It was good," he said. "We were able to tighten it down. There weren't a lot of accounts."

There was up to about $4 billion on the books, he said.

The deal was sold via Rule 144A and Regulation S.

Bookrunners were Citigroup Global Markets Inc. and Morgan Stanley & Co. Inc.

The deal is guaranteed by the Blackstone Group and its subsidiaries, Blackstone Holdings I LP, Blackstone Holdings II LP, Blackstone Holdings III LP and Blackstone Holdings IV LP.

Proceeds are being used for general corporate purposes.

The Blackstone Group is based in New York City.

Raymond James upsizes sale

Raymond James Financial sold an upsized $300 million in 8.6% 10-year senior notes at Treasuries plus 500 bps, an informed source said.

The size was originally $250 million, a market source said, but was upsized after books grew to $600 million.

The deal came in line with talk in the 500 bps area, he said.

The bond was not freed for trading yet, and there was no level available on it, he said.

Bookrunners were Citigroup and J.P. Morgan Securities Inc.

Proceeds will be used for a capital contribution to RJ Bank, to fund the growth of its domestic broker-dealer subsidiaries and for working capital.

The parent company of brokerage and financial services subsidiaries is based in St. Petersburg, Fla.

New deals remain slow

Issuance could be done for the week, a syndicate source said, as deals hit the double digits early in the week. A slowdown emerged on Wednesday, largely due to the Federal Reserve meeting.

"We're done on our end," the source said, referring to any deals left to price this week.

It's been a "pretty crazy" week, a market source said. "It was a little busier than we thought."

It's unclear if the coming week will net as many new deals, although if it does, they will likely be on the small side, and mostly from BBB-rated issuers, the market source said.

"We've seen some good names, but a lot of small ones [too]," he said.

Cleveland Electric offers bond

Cleveland Electric & Illuminating sold $300 million 5.5% 15-year first mortgage bonds at Treasuries plus 195 bps.

Goldman Sachs & Co., KeyBanc Capital Markets Inc. and UBS Investment Bank were the bookrunners.

Proceeds will be used to replace $150 million of outstanding 7.75% bonds, to repay a portion of short-term borrowings and for general corporate purposes.

The electric subsidiary of FirstEnergy Corp. is based in Akron, Ohio.

Blackstone bond improves

The new 6.625% bond due 2019 from Blackstone Holdings Finance was better once it hit the secondary, a trader said. The 10-year tightened more than 10 bps, quoted at 304 bps bid, 299 bps offered.

It was the company's first bond offering, which the trader said contributed to its tightening, and adding that "it's going to be at the top of the market."

Cleveland Electric trades unchanged

The trading level for the new Cleveland Electric 5.5% bond due 2024 was quoted as virtually unchanged from where it priced at 195 bps over Treasuries, a trader said. It was trading at 194 bps bid, he said.

Discovery Communications moves in

A new 10-year bond from Discovery Communications was improved by 10 to 20 bps from its price of Treasuries plus 200 bps, a trader said late in the day.

It was quoted at 188 bps bid, 180 bps offered, he said.

Summer lull hits secondary

Although the primary has seen its share of new offerings for the week, the secondary has not gotten in on much of the action, a trader in the industrial sector said Thursday.

"We're in the summer months, where it's traditionally slow," he said. "Accounts are on vacation and pretty much shut down."

August and part of July have been unusually busy on the new deal side, but most have not seen major offerings.

"July was busier than I expected," he said, "but if you look at deal sizes, they're all smaller."

There is a new rate environment, he said, adding that as rates go higher, "I think people will start jumping in off the sidelines to take advantage."

Snap-on bond levels off

Tool maker Snap-on Inc. saw its new 6.125% bond due 2021 level out after gaining slightly from its price of 245 bps over Treasuries, a trader said.

It was quoted at 240 bps bid, 236 bps offered, which was the same level at which it was quoted Wednesday.

International Paper, Altria top trading

A recent issue from International Paper Co. and an outstanding bond from Altria Group Inc. were among the day's most heavily traded, a trader said.

The International Paper 7.5% bond due 2021 has been active lately. This comes after the paper and packaging company announced its intention to buy back $1 billion in notes and a day after it was upgraded by analysts at Goldman Sachs.

Altria Group's bonds are often among the most-popular with investors, and its 7.125% due 2010 was no exception early Thursday.

Two notes from Citigroup Inc. were also among the top-traded.

Bank, broker CDS mixed

Credit-default swaps for bank and brokerage names were mixed by late afternoon, a trader said. Both were in a range of 5 bps wider or tighter, the trader said.

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