Deutsche Telekom, Telecom Italia, Comcast price as telecoms fill primary; bonds trader lower

By Andrea Heisinger

New York, June 15 - Telecommunications names had a monopoly on the high-grade primary bond market Monday with sales from Deutsche Telekom International Finance BV, Telecom Italia Capital and Comcast Corp.

Upcoming offerings were announced by Lincoln Financial Group and Japan Finance Corp.

The tone of the primary was down along with the equities market. News of a possible crackdown on ratings agencies having to do with corporate bonds did not seem to have much impact on the high-grade bond market, a source said.

The weakness spilled over to the secondary side where two of the day's new bonds were unchanged or wider in trading, and a recent sale from Dell Inc. also backtracked and was quoted wider than where it priced the previous week.

Spreads were worse in general by late Monday as Treasury yields tightened. Yields were mostly wider during the previous week. The 10-year note was about 8 basis points better with a 3.71% yield, for example.

Comcast offers oversubscribed deal

Telephone, television and internet services provider Comcast priced $1.5 billion of notes in two tranches, with the sale modestly oversubscribed, an informed source said.

Books for the offering totaled about $2.5 billion, he said, adding that there was more demand for the 30-year tranche.

The $700 million of 5.7% 10-year bonds priced at 200 bps over Treasuries, as did the $800 million of 6.55% 30-year notes.

Both tranches were talked between 200 and 212.5 bps, the source said, and came at the tight end of that range.

The notes were talked based on the demand for the 30-year notes, the source said.

Banc of America Securities LLC, Barclays Capital Inc., BNP Paribas Securities Corp. and Wachovia Capital Markets LLC ran the books for the Philadelphia-based issuer.

Deutsche Telekom sells two tranches

Telecommunications company Deutsche Telekom International Finance, a subsidiary of Deutsche Telekom AG, sold $1.5 billion of global notes in two tranches.

It was an even split, with $750 million of 4.875% five-year notes priced at Treasuries plus 225 bps and $750 million 6% 10-year notes at Treasuries plus 237.5 bps.

Proceeds are being lent to the Deutsche Telekom group companies to be used for general corporate purposes.

Barclays Capital and Citigroup Global Markets Inc. ran the books. The issuer is based in Amsterdam, the Netherlands, with the parent company based in Bonn, Germany.

Telecom Italia prices $2 billion

Italian telephone company Telecom Italia Capital sold $2 billion of guaranteed senior notes in two tranches Monday, split evenly between five- and 10-year maturities.

The $1 billion of 6.175% five-year notes priced at Treasuries plus 345 bps, as did the $1 billion of 7.175% 10-year notes.

Both are guaranteed by parent company Telecom Italia SpA.

Bookrunners were Goldman Sachs & Co., J.P. Morgan Securities Inc. and Morgan Stanley & Co. Inc.

The Rome-based company plans to use proceeds for inter-company loans for general corporate purposes, including repayment of debt.

Telecom sales fill primary

The week began with an oddly similar crop of new deals - all from various telecommunications names.

"Today was apparently telecom day," a market source said.

Many of these new deals were not seen in trading, or did not perform well. This was due to a mix of factors.

"Overall [the market] was weaker," a syndicate source said. "Equities were down, and the market as a whole was down."

The sources could not pinpoint a certain factor that led to this depressed tone but said it was simply "because it was Monday," as one source said.

"It didn't help there were three telecom deals in the market today," he added.

There is moderate new issuance expected for at least the next couple of days, but it will likely slow when Thursday arrives.

"The summer slowdown may be in effect right now," the syndicate source said. "It's not too exciting."

The news that credit ratings agencies may face reforms from government, including differentiating between corporate bonds and mortgage-backed securities, didn't seem to affect the tone of the high-grade market.

"I didn't see anything," a market source said, "but to be honest I was pretty wrapped up in the [Comcast] deal today."

Lincoln Financial plans offerings

Lincoln Financial Group announced plans Monday to sell up to $500 million in senior debt, according to a press release.

This will be done along with a sale of about $950 million in preferred stock. The preferred stock would be issued via the government's Capital Purchase Program.

The deals are being done concurrently with a $600 million sale of common stock.

Lincoln plans to use $1 billion of proceeds from the notes, preferred and common stock offerings for its principal insurance subsidiary. This subsidiary will then use the proceeds for general corporate purposes, including debt repayment and investment in the company's core businesses.

The insurance and financial services company is based in Philadelphia.

Japan Finance to price guaranteed bond

The Japan Finance Corp. announced an offering of two-year guaranteed bonds Monday, according to a 424B5 filing with the Securities and Exchange Commission.

A source away from the sale said he did not see the issue price Monday. The issue is guaranteed by the Japanese government.

Bookrunners are Deutsche Bank Securities, Barclays Capital and Morgan Stanley.

The government-owned issuer promotes socioeconomic development in Japan and is based in Tokyo.

Deutsche Telekom bond unchanged

One tranche of the day's sale from Deutsche Telekom was mostly unchanged in trading, a trader said, with levels slightly wider to slightly tighter but not moved much from the price of Treasuries plus 225 bps.

He quoted the 4.875% due 2014 at 226 bps bid, 221 bps offered. The second tranche of the sale, due 2019, was not seen trading, he said.

The new two-tranche offering from Telecom Italia was also not seen in the secondary, the trader said, adding it was "too soon" after pricing.

Comcast bond widens

The 5.7% bond due 2019 from Comcast was slightly wider to unchanged in the secondary, a trader said. The bond sold at 200 bps over Treasuries and was quoted at 210 bps bid, 200 bps offered. There was no after-market level for the 2039 tranche, the source said.

Dell bond popular, loses ground

Despite its popularity with investors, a recent bond from computer-maker Dell Inc. was about 10 bps wider than its price the previous week.

The 5.875% due 2019 was sold at Treasuries plus 195 bps and was quoted late Monday at 205 bps bid, 203 bps offered, a trader said. This was further slippage from the 198 bps bid level it was at Friday.

New bonds widen, volume slows

Two of the day's bonds, as well as the slightly older one from Dell, were wider or unchanged in the secondary, traders said.

It was due to a "slow Monday," one of the traders said. This continues a trend of bonds not tightening wildly once they hit the secondary, which traders had attributed to notes being priced too cheaply.

Industrials top trading

Financials were booted from the top of the most-traded list as of early Monday afternoon, a trader said. Instead, a handful of industrial names were popular with investors.

Dell, Inc. had one of the top bonds of the day, as its 5.875% due 2019 led the list. The bond was part of a two-tranche offering done the previous week.

Altria Group Inc.'s 9.7% due 2018 trailed Dell's bond, with outstanding notes from GlaxoSmithKline Capital Inc. and Dow Chemical Co. also near the top.

A 3.125% bond due 2011 from JPMorgan Chase & Co. was the only financial name to crack the top five. It is among the large banking names expected to pay back Temporary Asset Relief Program funds to the government on Wednesday.

Bank and brokerage credit-default swaps were 5 to 15 bps wider across the board, a trader said late Monday.

Financial hybrids get junk interest

Split-rated or low-BBB high-grade hybrids from financial names have gained in popularity among junk accounts, a trader said.

"The hybrids seem to be in vogue," he said.

He quoted a split-rated variable-rate note due 2047 from Regions Financial (Ba1/BBB) as unchanged, with $45 million traded. It was the most-traded in the high-yield market "by far," the trader said.

"It's a little unusual that $45 million would trade and be unchanged from Friday, but that's what it is," he said.

A second split-rated bond from Lincoln National, whose subsidiary announced a senior note offering Monday, was also popular. The variable-rate note due 2066 (Ba1/BBB) had seen $10 million in trading, the trader said, but was down to 62.5 from 67.

Paul Deckelman contributed to this commentary

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