Johnson & Johnson, MetLife price issues; calendar for balance of week seen slow

By Andrea Heisinger and Paul Deckelman

Omaha, June 18 - Johnson & Johnson, Export Development Canada and MetLife Global Funding priced mid-week issues as the investment-grade market retained the stability that returned at the beginning of the week.

The Johnson & Johnson issue "could have come any day," a source close to it said, with the company's ratings ensuring that it priced well.

The day likely brought the peak of issuance for the week, another source said.

In the investment-grade secondary market Wednesday, advancing issues led decliners by a seven-to-six ratio, while overall market activity, reflected in dollar volumes, was up 4% from Tuesday's pace.

Johnson & Johnson at tight end

The $1.6 billion issue from Johnson & Johnson was another in a line of large issues from non-financial names to come into the market this week.

It priced a $900 million tranche of 5.15% 10-year notes at 99.794 to yield 5.176% with a spread of Treasuries plus 103 basis points. This was at the tight end of price talk of 105 bps area.

The second tranche of $700 million in 5.85% 30-year notes priced at 99.952 to yield 5.853% with a spread of Treasuries plus 113 bps. This was also at the tight end of talk of 115 bps area.

The issue went well, but perhaps could have sold more with the right investors, a source said.

"It was a very straightforward deal, and it went very well," he said. "It was just over two times oversubscribed and the reason it wasn't 10 times oversubscribed was relative to not having hedge funds or others like it in on it."

The company is rated about as good as you can get, he said, and has the luxury of name recognition.

"It's just one of those names that could come in any day of the week and get something done," he said.

Goldman Sachs & Co., Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and Deutsche Bank Securities Inc. ran the books.

Export Development brings $1 billion

The day's issues also included one from Export Development Canada, with $1 billion in 3.75% three-year bonds priced at 99.855 to yield 3.8% with a spread of Treasuries plus 93.5 basis points.

BNP Paribas Securities, Citigroup, HSBC Securities and RBC Capital Markets were bookrunners.

MetLife Global Funding priced an upsized $600 million two-year floating-rate notes at par to yield three-month Libor plus 75 bps.

The issue was increased from $500 million, and priced under Rule 144A.

Banc of America Securities LLC, Deutsche Bank and Goldman Sachs were bookrunners.

Terms were given Wednesday for an issue from Tennessee Valley Authority that priced Tuesday.

The utility did $500 million of 5.5% 30-year global power bonds at Treasuries plus 75 bps.

Barclays Capital Inc. and Morgan Stanley & Co. Inc. were bookrunners.

The company saw widespread demand for the bonds, senior vice president and treasurer John Hoskins said in a press release.

Attractive interest rates, which remain historically low, and calmer market conditions at the beginning of this week contributed to the success of the transaction, according to Hoskins.

"This financing will benefit TVA and its power customers by helping to control TVA's interest expense for years to come," he said in the release.

Activity sparse

Wednesday continued the trend of only a handful of issues pricing.

"There weren't a ton of deals in the market today," a source said. "Johnson's was about it."

There could be an issue tomorrow, one source said, with another saying that they had nothing on the calendar for the balance of the week.

Johnson & Johnson tightens

A trader saw the new Johnson & Johnson 10-year notes tightening slightly from the levels at which the $900 million of 2018 bonds priced, with their spread versus Treasuries at 101 bps bid, 99 bps offered, versus 103 bps over at the pricing. He said that he had not seen any dealings in the medical products company's $700 million of new 2038 bonds, which priced at 113 bps over Treasuries.

Elsewhere on the new-deal front, he saw the Vulcan Materials Co. 6.30% notes due 2013 "tighten 8 or 9" basis points from where the $250 million of bonds had priced on Tuesday. "Somewhere out there this morning at 261[bps]," versus the 270 bps spread at pricing. He saw no trace of the company's $400 million of new 7% notes due 2018, which priced at 280 bps over on Tuesday.

The trader saw the new Thomson Reuters 5.95% notes due 2013 offered at 232 bps, which he called about 10 bps tighter than the 243 bps over spread at which the media company's $750 million of bonds priced on Tuesday.

He meantime saw its $1 billion of 6.50% notes due 2018 at 242 bps, little changed from their 243 bps issue price, also Tuesday.

Time Warner Cable strong

The trader saw "considerable tightening" in Time Warner Cable's new 6.20% notes due 2013, $1.5 billion of which priced Monday at a spread of 250 bps over. On Wednesday afternoon, he saw those bonds at 228 bps bid, 220 bps offered, "considerably tighter," he reiterated.

The cable operator's new 7.30% notes due 2038, which priced Monday at 255 bps over Treasuries, were seen offered at 252 bps over on Wednesday.

Financial CDS costs rise

In the credit default swaps market, a trader saw debt-protection costs for both big banks and major brokerages widen out by 3 bps to 10 bps on the session.

Despite some market rumors that Warren Buffet might be looking at making an investment in Wachovia Bank, a trader saw its CDS costs ending the day 4 bps wider at 187 bps bid, 197 bps offered.

He also saw Morgan Stanley's debt-protection costs widen out by 10 bps to 165 bps bid, 175 bps offered, after the big investment bank reported a rocky fiscal second quarter ended May 3, which earnings falling more than 50% from year-ago levels amid the continuing market turmoil, despite more than $1.4 billion of asset sales.

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