Terms emerge on $250 million Wachovia add-on; Citi loses ground

By Sheri Kasprzak

New York, Dec. 14 - New issue action was fairly light to round out the week but terms emerged on an add on from Wachovia Corp.

The bank disclosed that it priced a $250 million add-on to its 5.75% notes on Thursday, bringing the total notes issued to $1.95 billion.

The notes, due June 15, 2017, were priced at 98.352% to yield 5.98%

Wachovia Capital Markets was the bookrunner.

Meanwhile, a market source said Friday that activity may be weak now but that's typical of the holiday season.

"It's normally pretty quiet around this time of year, so I don't really think there's anything to be concerned about," he said. "At the beginning of the year, things will probably get better but for now, no, we're not really seeing a lot of new deals."

Earlier this week, JPMorgan Chase & Co. priced two tranches of a senior notes (Aa2/AA-/AA-), including an issue of $3 billion in 6% notes due 2018 priced at 99.814% with a spread of Treasuries plus 185 basis points. The issue also included a tranche of $500 million in 5.375% notes due 2012 priced at 100.972% to yield 5.141% with a spread of Treasuries plus 160 basis points.

J.P. Morgan was the bookrunner with Deutsche Bank and Cabrera as the co-managers.

Citi wider on SIV rescue

While the major news in the investment-grade arena on Friday was generated by Citigroup's announcement that it will consolidate $49 billion of assets now contained in several troubled structured investment vehicles onto its balance sheet, the New York-based banking giant's bonds were not especially actively traded, though they were described as having widened out on the news.

Meanwhile JP Morgan's new bonds were seen having firmed, and the company's existing bonds were mixed.

Outside of the financial names, bonds of Home Depot were seen having tightened.

Overall, declining issues topped advancers by about a seven-to-six margin. Activity, as measured by dollar volume of transactions, was off about 19% from Thursday's levels.

A trader said that "generically speaking," Citigroup's bonds were about 5 to 10 basis points wider following the news that the company will take the $49 billion of SIV assets onto its balance sheet - although he allowed that later in the day, the bonds "seemed like they came back."

"They were perhaps helped by a vote of confidence from Goldman Sachs, who rated Citi's debt as an "overweight". That endorsement followed a Moody's Investors Service downgrade of the company's credit ratings, although Moody's attributed the cut to factors other than Citi's SIV initiative.

Citigroup's 5.3% notes due 2012 were quoted bid at 153 basis points over Treasuries, while its 5.85% notes due 2013 were at 195 bps over, and its 6 1/8% notes due 2017 were at 173 bps over.

But while volume in the Citi bonds was respectable enough, they were by no means anywhere nearly the most actively traded issues, market sources said.

JPMorgan 10-years tighter

The trader said, for example, that there was much more interest in the market in the new JP Morgan 10-year notes, which had priced Thursday at 185 bps over. With the $3 billion of new paper now freed for secondary dealings, he said the bonds had tightened to 180 bps over.

A market source saw JP Morgan's existing bonds meantime mixed, with its 4.5% notes due 2010 seen having tightened about 20 bps to the 138 bps level, but its 5.6% notes due 2011 having widened out about 10 bps to peg them at that same 138 bps level.

One of the most actively traded issues on the day was Home Depot's 5.4% notes due 2016, which tightened to about the 245 bps level.

However, there was no fresh news out on the Atlanta-based home-improvement supply retailer that might explain the activity.

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