Thomson Reuters, Vulcan Materials, SC E&G price; issuers remain hesitant despite stability

By Andrea Heisinger and Paul Deckelman

Omaha, June 17 - Investment-grade issuance picked up Tuesday, with Thomson Reuters Corp., Vulcan Materials Co. and South Carolina Electric & Gas Co. among those pricing.

The day was "good enough to get some deals done," one source said. Another said it was simply stable enough for some issuers to come into the market that had been waiting for an opportune time.

"The Treasury market's down 50 [basis] points, but it seems to be a pretty good day," he said.

In the investment-grade secondary market Tuesday, advancing issues led decliners by a five-to-four ratio, while overall market activity, reflected in dollar volumes, jumped nearly 45% from Monday's pace.

Spreads in general were seen wider, as Treasury yields moved lower; the yield on the benchmark 10-year issue, for instance, tightened by 7 basis points to 4.20%.

Thomson Reuters at tight end

Larger issues are starting to come out of the woodwork again, following Monday's $5 billion issue from Time Warner Cable.

Thomson Reuters Corp. priced $1.75 billion in two tranches.

The $750 million of 5.95% five-year notes priced at 99.498 to yield 6.065% with a spread of Treasuries plus 243 basis points.

The $1 billion tranche of 6.5% 10-year notes priced at 99.084 to yield 6.625% with a spread of Treasuries plus 243 bps.

Both tranches came in at the tight end of price talk of 245 bps area.

Barclays Capital Inc., J.P. Morgan Securities Inc., Morgan Stanley & Co., Inc. and RBS Greenwich Capital were bookrunners.

Vulcan also at tight end

Vulcan Materials priced $650 million, also in two tranches.

The $250 million of 6.3% five-year notes priced at 99.799 to yield 6.348% with a spread of Treasuries plus 270 bps.

The $400 million of 7% 10-year notes priced at 99.895 to yield 7.015% with a spread of Treasuries plus 280 bps.

Both priced at the tight end of talk, which was 275 bps area for the five-year notes and 285 bps area for the 10-year notes.

"It went really well, and we were pretty happy with it," a source close to the deal said, adding that it was well oversubscribed.

South Caroline E&G adds on

South Carolina E&G reopened their 6.05% 30-year first mortgage bonds to add $110 million.

The bonds priced at 95.122, plus accrued interest from Jan. 14, with a yield of 6.42% and spread of Treasuries plus 165 bps.

Total issuance is $360 million, including $250 million issued Jan. 14 at Treasuries plus 172 bps.

Wachovia Capital Markets was bookrunner.

'Tons of cash'

As issuers make their way back into the market after a slowdown, some are being overly cautious, one source said. There remains somewhat of a backlog, but it's uncertain when it will all come out.

"There is tons of cash out there, and I think people could do a lot more than they want to," he said. "Syndicate people are leary and don't want to be the one to give them the go-ahead call and have it be the one [deal] that tanks."

Issuance is expected to remain steady for the next couple of days if market conditions hold.

One source said he had one or two issues that could come out Wednesday, but nothing that has been made public.

TimeWarner cable bonds tighten

A trader said that the new TimeWarner Cable 6.20% notes due 2013 had tightened up notably to a spread over Treasuries of 239 bps bid, 232 bps offered, in from the 250 bps over spread at which those $1.5 billion of bonds had priced on Monday.

He also saw the company's $2 billion of 6.75% notes due 2018 in at 243 bps bid, 240 bps offered, in from Monday's spread at pricing of 250 bps over.

And he saw the $1.5 billion of new 7.30% bonds due 2038, which had priced Monday at 255 bps over Treasuries, having narrowed a little to 253 bps.

Another trader said that he had seen the 10-year bonds 7 bps tighter during the morning and the 30-year bonds "maybe" in by about 3 to 4 bps.

The cable operator's established 5 7/8% notes due 2017 were meantime seen having moved up solidly to a spread of 237 bps; in dollar-price terms, those bonds - among the most actively traded investment-grade issues, a market source said - rose about 1¼ points to about the 95.5 area.

A trader said that the new Vulcan Materials 7% notes due 2018, $400 million of which priced at 280 bps, had firmed slightly to around the 277 bps mark. He had not seen the $250 million of 6.30% notes due 2013, which priced at 270 bps off Treasuries.

Goldman's good numbers a big help

Among the established issues, Goldman Sachs's better than expected earnings proved to be a tonic for the financial sector, and for Goldman's own bonds. Its 5.3% notes due 2012 tightened by 10 bps to 155 bps bid. That Goldman issue was among the most actively traded bonds of the session

Other Goldman paper seen having moved up in busy trading included its 6.75% bonds due 2037, at 241 bps bid; its 5 5/8% notes due 2017 at 240 bps; and its 6 7/8% notes due 2011, seen at 196 bps.

The Goldman paper rose after the giant brokerage company reported second-quarter net income of $2.051 billion, or $4.58 a share. While that was down from its year-ago profit of $2.29 billion, or $4.93 a share, it still handily beat analysts' forecasts, which on average projected around $3.40 per share of earnings.

Helped by those good numbers, the cost of debt protection for Goldman bonds was about 10 bps tighter on the day to 160 bps bid, 170 bps offered, a trader said.

In general, he saw big-bank credit default swap costs tighten by 1 bp to 5 bps, while brokerage company CDS levels were anywhere from 5 bps tighter to 10 bps tighter.

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