Kellogg, Waste Management, JPMorgan issue

By Andrea Heisinger and Paul Deckelman

Omaha, March 3 - It was a somewhat slow Monday following a high-volume week, with Kellogg Co., Waste Management, Inc. and JPMorgan Chase & Co. pricing new issues.

In the investment-grade secondary market Monday, advancing issues led decliners by a six-to-five ratio, while overall market activity, reflected in dollar volumes, rose by 6% from Friday's levels.

The intense focus on new-issue paper that pretty much dominated the secondary market last week, among bustling primary activity, faded on Monday. Some of the new-issue names such as McDonald's Corp. were not much traded, while there was interest in one issue - but not the other - of Computer Sciences Corp.'s two-tranche deal.

The new Kellogg's deal was seen having firmed a little, but nothing was seen in the new Waste Management issue

Sprint Nextel Corp.'s bonds - which were badly battered last week - moved up on Monday, helped by, among other factors, news media speculation the company could be an M&A target under the right circumstances.

Kellogg increases, comes tight

Kellogg priced an upsized $750 million of 4.25% five-year senior notes at 99.813 to yield 4.292% with a spread of Treasuries plus 180 basis points.

The size was increased from $500 million.

The spread came on the tight end of price talk of 180 to 183 bps, a source close to the issue said.

Bookrunners were Banc of America Securities LLC and Citigroup Global Markets Inc.

The issue was a little more than two times oversubscribed and went well, the source said.

Waste Management upsizes

Waste Management also upsized its issue, from $500 million to $600 million.

The 6.1% 10-year senior notes priced at a spread of Treasuries plus 260 bps.

Waste Management's deal also came in line with price talk, a source said.

Banc of America, J.P. Morgan Securities Inc. and RBS Greenwich Capital were bookrunners.

JPMorgan sells floaters

Another issue came from JPMorgan Chase with $1.1 billion two-year floaters priced at par to yield three-month Libor plus 49 bps.

J.P. Morgan was agent.

Vectren Utility Holdings, Inc. announced an issue of senior monthly notes due 2039.

It could not be confirmed at press time whether the issue priced.

Bookrunner for the issue is Edward Jones.

Kellogg pays 40 bps premium

One of Monday's issuers paid a surprising amount to get its offering into the market, sources commented.

Kellogg paid around 40 bps new issue premium, which market sources commented was high.

"It's kind of weird because usually if [a company's] paying that much they have some kind of sub-prime exposure," a source said. "They're just a cereal company."

Sentiment still poor

A negative tone lingered over the market - a leftover from Friday.

"I thought things would be worse today, actually," a source said. "The equity market hung in there."

This week is not likely to overtake last week's new issue volume of more than $24 billion issuance, although some sources said there is a large chunk waiting to come into the market.

"It could be a busy week across the board but it all comes down to what the tone is," a source said.

"It was negative tone today, but things could pick up tomorrow."

Some sources said one bookrunner has about $25 billion in new issues scheduled to come out this week.

"There are just a lot of things waiting to come into the market," a market source said. "I think it could be another busy week. Probably not as busy as last week, but busy."

Trading surprisingly slow

A trader called Monday "a little bit of a weird day," adding that "it felt like the day never got started."

He saw that even some of the much ballyhooed new issues that priced last week, such as McDonald's and Computer Sciences, "didn't see a ton of trading." There was, he said, "definitely some weakness, people feeling things out."

The new Kellogg's 4.25% notes due 2013 didn't exactly do great - or as the iconic Kellogg's advertising mascot Tony the Tiger would put it, GRRRRRREAT! - but they were a little firmer at 178 bps bid, 176 bps offered, versus their spread at issue of 180 bps.

The trader said he had seen no aftermarket activity in Waste Management's new 6.10% notes due 2018.

Activity was "name specific - actually, issue specific," he said. For instance, Computer Sciences' 6.50 % notes due 2018 "were doing well - but [as for] the five years, no one really cared."

"Flows were lighter" in the new-deal bonds, as opposed to last week, when trading in the new issues dominated the secondary.

Sprint rebounds a bit

Among the established issues, the trader saw Sprint's bonds "a little bit better this morning, compared with how things were on Friday," and the Overland Park, Kans., wireless company's bonds held those gains through the end of the session.

The trader noted a weekend news article touting the possibility that phone giant Verizon might be interested in acquiring its smaller rival since "it would be half the cost that [Verizon's main wireless competitor] Cingular paid for AT&T Wireless on a per-customer basis."

He saw Sprint's 6% notes due 2016 trading around 74.25 bid, 74.5 offered, holding within a wider 74-75 context for most of the day.

He said that despite Sprint's still nominally investment-grade ratings, the bonds "absolutely" are now being quoted in dollar terms, as if they were junk rated, rather than on a spread-versus Treasuries basis.

At his shop, he said, "we made the switch" to dollar quotes rather than spread quotes on Thursday, when Sprint's bonds tumbled badly after the company posted a nearly $30 billion quarterly loss, disclosed that it had to draw down a big chunk of its $3 billion credit facility and was downgraded to junk status by Fitch Ratings, with Standard & Poor's also eyeing Sprint for a downgrade and Moody's lowering its outlook.

A market source at another desk said the Sprint bonds were among the more actively traded high-grade issues Monday. The 6s were at 74.25, up about ¼ point. But the big mover of the day for Sprint was its 7 5/8% notes due 2011, quoted up more than 2 points at just under 92 bid. Its 8 3/8% notes due 2012 were seen up a point at 90, and its 6 7/8% bonds due 2028 were up more than a point at 72 bid.

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