UnitedHealth, Citigroup, Nstar, J.P. Morgan, Wachovia price on slightly brighter tone; financials better

By Andrea Heisinger and Paul Deckelman

Omaha, Nov. 14 - A slight improvement in tone brought new issuers to the market Wednesday, including UnitedHealth Group, Inc., Citigroup, Inc., Nstar Electric Co., J.P. Morgan, Bank of America Corp., Wachovia Capital Trust X.

"The tone was a little better today," a market source said, adding that it faded by the end of the day.

In the secondary market Wednesday, Bear Stearns' announcement that it would be writing down some $1.2 billion in the fourth quarter in connection with losses from mortgage-backed securities and collateralized debt obligations gave the important financial sector a shot in the arm - because it was far less than what many on Wall Street had been expecting, with some predictions ranging as high as $3 billion or more.

Elsewhere, Citigroup's new deal was seen pretty much holding steady in the aftermarket.

Merrill Lynch's announcement that it had hired a new chief executive officer was seen by a trader as having not much impact on its bonds. The good news from Bear Stearns helped its credit default swap spreads and those of its sector peers tighten on the session.

UnitedHealth brings $1.6 billion

In primary news, UnitedHealth priced $1.6 billion in four tranches.

The $250 million 5.125% three-year tranche priced at 99.888 to yield 5.166% at a spread of Treasuries plus 165 basis points.

The $450 million 5.5% five-year tranche priced at 99.678 to yield 5.575% at a spread of Treasuries plus 170 bps.

The $250 million 6% 10-year tranche priced at 99.372 to yield 6.085% at a spread of Treasuries plus 180 bps.

The $650 million 6.625% 30-year tranche priced at 99.241 to yield 6.684% at a spread of Treasuries plus 205 bps.

Deutsche Bank, Goldman Sachs, J.P. Morgan and Merrill Lynch were bookrunners for the Rule 144A deal.

Also among new deals, Wachovia priced $750 million of 7.85% 60-year trust preferred securities at par of $25. Wachovia was sole bookrunner.

Nstar Electric priced $300 million 5.625% 10-year notes at 99.563 to yield 5.683% at a spread of Treasuries plus 140 bps.

Bookrunners were Citigroup, Goldman Sachs and J.P. Morgan.

Citigroup priced $4 billion of 10-year notes at Treasuries plus 190 bps, at the tight end of price talk. Full terms were not available at press time.

Other investment banks also priced issues, with J.P. Morgan pricing $1.5 billion in three-month Libor plus 35 bps two-year floaters at par.

Bank of America priced $900 million, or 36 million shares, of non-cumulative 7.25% perpetual preferred stock at $25 per share, with Bank of America acting as bookrunner.

Fiserv set to price

Fiserv, Inc. is expected to price its issue of notes in five and 10-year tranches Thursday morning, an informed source said.

Bookrunners are Credit Suisse, Wachovia and J.P. Morgan.

Proceeds will be used to pay a portion of the $4.4 billion purchase price for the acquisition of CheckFree Corp.

Jebel Ali Free Zone FZE has given more details on its upcoming issue, with $1.5 billion to $2 billion split between equal amounts of dollar-denominated bonds and a five-year floating dirham-denominated sukuk.

Barclays, Deutsche Bank, Dubai Islamic Bank and Lehman Brothers are bookrunners for the deal that is currently on a road show.

Dubai Electricity and Water Authority has announced it will issue a benchmark-size dollar denominated issue of notes (A1/AA) in three tranches.

Barclays, Citigroup and Dubai Islamic Bank are bookrunners for the Rule 144A issue.

Market still uncertain

Market conditions are largely back to what they were in June or July, one source said.

"Most of the stuff that priced Tuesday had, like, 40 basis points [new issue] premium," the source said.

Citigroup's issue Wednesday had 20 to 25 bps premium.

"People are paying a lot to get in the market," one source said.

The trend of new issues still changes from day to day, with morning market conditions dictating much of what happens in the remainder of the session, they said.

"Deals are just plugging along and we're getting toward the end of the year when there's not as much liquidity," a market source said.

"At least we had another day of stability in the equity market today. We're back to the same environment as last summer."

Bear bounces on bullish news

A trader said that Bear Stearns' bonds were probably 10 to 15 bps tighter on the day in the long end following the company's announcement of lower than expected writedown projections.

He saw the 6.40% notes due 2017 at one point 260 bps over comparable Treasuries, versus levels around 290 bps bid, 280 bps offered on Tuesday. He said that 'they sold off at the end of the day" a little, ending at 265 bps bid, 255 bps offered or 270 bps bid, 260 bps offered - still a big improvement over the preceding session.

A market source saw the bonds as one of the most actively traded issues, bouncing around from around 279 bps early on to as low as 255 bps before going back out a little towards the end of the day.

Yet another source saw the bonds finishing at 254 bps over, a pickup of some 24 bps on the session.

New Citi bonds hang in

The first trader saw the new Citigroup 10-year bonds, which had priced at 190 bps over, firming a little to 189 bps, before being left at 190 bps bid, 186 bps offered. He said that the deal was well over-subscribed, with some $6 billion in orders for the $4 billion in bonds.

Despite that demand, the issue "didn't go anywhere" once it had priced because "the equity market sold off, and that prevented anything from getting any tighter."

Merrill tighter, but CEO impact doubted

The trader said that Merrill Lynch's bonds were "tighter along with everything else," but he didn't believe that the news that the beleaguered bank had hired NYSE executive John Thain to replace the ousted Stanley O'Neal as CEO had much impact. The official announcement of Thain's hiring did not come until late afternoon, although there were media stories circulating earlier indicating that he was the company's CEO choice.

Merrill Lynch's 6.40% notes due 2017 were tighter from the get-go, a source said, opening at about 222 bps over, in from their late Tuesday level at 230 bps. At one point during the session, the bonds tightened to some 194 bps over, equivalent to a dollar price north of 101, before coming down off that peak to around 212 bps, still a good 19 bps tighter on the day.

Another source pegged Merrill's 4¼% notes due 2010 at 217 bps over, a narrowing of better than 32 bps on the session.

Brokerage spreads come in

A trader saw the brokerage CDS spreads initially tighten by anywhere from 7 bps to 25 bps following the Bear Stearns announcement, with Bear's own debt-protection costs understandably tightening the most, to 130 bps bid, 140 bps offered from 155 bps bid, 165 bps offered late Tuesday. However, after that initial flurry, Bear's spread and those of its sector peers did widen out again to levels above the earlier tights. However, for the most part, they were still inside of where they had been on Tuesday. Bear's CDS spread went back to 140 bps bid, 150 bps offered, although by day's end, they had again narrowed to 130 bps bid, 140 bps offered.

The pattern was the same with the debt-protection costs of the other brokerage names. Lehman Brothers, which had finished at 125 bps bid, 135 bps offered on Tuesday, got as tight as 115 bps bid, 125 bps offered after the Bear Stearns news, only to widen back out a to 125 bps bid, 135 bps offered later. However, it finally ended at 118 bps bid, 128 bps offered.

But Merrill Lynch, after narrowing to 110 bps bid, 120 bps offered, moved back up to 115 bps bid, 125 bps offered, still inside of the 120 bps bid, 130 bps offered level at which it had finished on Tuesday.

Morgan Stanley, which had ended Tuesday at 97 bps bid, 107 bps offered, got as good as 90 bps bid, 100 bps offered after the Bear Stearns news, before pushing back up slightly to 92 bps bid, 102 bps offered.

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