GE Capital prices massive deal on decent open, bank earnings; Martin Marietta also issues

By Andrea Heisinger and Paul Deckelman

Omaha, April 16 - A large issue from General Electric Capital Corp. took center stage Wednesday, with an issue from Martin Marietta Materials Inc. also pricing.

GE Capital priced $8.5 billion of notes in three tranches, ranking as one of the company's - and corporate issuers' in general - largest ever.

It overshadows the $6.9 billion issue from AstraZeneca plc last September that surprised many with its success in the midst of the sub-prime mortgage meltdown.

GE Capital priced $2.5 billion of 4.8% five-year notes at 99.791 to yield 4.847% with a spread of Treasuries plus 205 basis points.

The $4 billion of 5.625% 10-year notes priced at 99.733 to yield 5.66% with a spread of Treasuries plus 200 bps.

Each of these tranches priced in line with talk of the 205 bps area for the five-year notes and the 200 bps area for the 10-year notes, a source close to the issue said.

"It landed pretty much exactly where we thought it would," he said.

The 30-year tranche was a reopening of the company's existing 5.875% notes to add $2 billion. They priced at 92.424 to yield 6.45% with a spread of Treasuries plus 199.4 bps.

Total issuance is now $6 billion, including $4 billion priced Jan. 8 at Treasuries plus 165 bps.

The new issue premium for the notes was reasonable, a market source said.

The five-year notes had around a 30 bps premium, the 10-year notes about 25 bps and the 30-year notes between 15 and 17 bps.

The source said the issue was somewhat surprising.

"It was pretty gutsy considering their bad earnings announcement this week," he said.

Bookrunners for the issue were Banc of America Securities LLC, Goldman Sachs & Co., Lehman Brothers Inc. and Morgan Stanley & Co. Inc.

Positive start opens door

The tone of the day was good enough for the issue, a source close to the issue said.

"The opening was decent enough," he said. "It was a massive trade, obviously. The bank earnings announcements this week were in line and moderately better than expected, so they decided to go for it."

The company's last deal was a $6 billion one in January.

This issue was not quite two times oversubscribed, the source said, with total books at $15 billion.

Martin Marietta sells $300 million

A much smaller issue from Martin Marietta also priced.

The building materials company priced $300 million 6.6% 10-year senior notes at 99.929 to yield 6.61% with a spread of Treasuries plus 295 bps.

Bookrunners were Banc of America, J.P. Morgan Securities Inc. and Wachovia Capital Markets LLC.

JPMorgan bringing hybrids

JPMorgan Chase & Co. announced an issue of hybrid non-cumulative perpetual preferred stock.

J.P. Morgan is bookrunner.

The rest of the week should be fairly quiet, sources said.

There should be a couple of issues Thursday, but nothing as large as what's already come out this week, a market source said.

"I think we'll keep plugging along," he said. "There was excellent tone today and we're definitely going to see some new stuff tomorrow."

Spreads tighter

In the investment-grade secondary market Wednesday, advancing issues continued to trail decliners by around a five-to-four ratio, while overall market activity, reflected in dollar volumes, rose about 14% from Tuesday's pace.

Spreads in general narrowed as Treasury yields continued to rise, with the yield on the benchmark 10-year note, for instance, widening out by 8 basis points to 3.68%.

The major news of the session was General Electric Capital's humongous $8.5 billion three-tranche deal; the new bonds were seen to have tightened from the spreads they showed when they priced. Its existing bonds meantime were seen having widened out pretty much across the board.

The newly priced deal for Martin Marietta Materials also tightened substantially, although that may have been just a case of the deal being priced too cheaply to begin with, a trader said.

Elsewhere, financial names were generally better, encouraged by JP Morgan Chase's better-than expected quarterly results, which helped investors shrug off the latest bad news - widely reported predictions that Merrill Lynch & Co. will have to take big writedowns when it reports earnings on Thursday, and may be forced to raise additional capital.

GE Capital bonds firm in aftermarket

When the new GE Capital bonds broke, traders saw them having tightened a few bps from their issue price.

A trader saw the 4.80% notes due 2013, which had priced at a spread of 205 bps over comparable Treasuries, left at 194 bps over. The 5.625% notes due 2018 firmed to 192 bps bid, 189 bps offered, versus 200 bps at the pricing, while the 5.875% bonds due 2038, which was a reopening, traded at 191 bps bid, 185 bps offered, versus 199.4 bps at the pricing.

GE Capital's existing bonds, meantime, declined pretty much across the board in order to catch up to the concessions on the new issue, with a market source seeing its 5% notes due 2011 out about 15 bps at 145 bps. At another desk, its 5.40% notes due 2017 were seen out 10 bps, at 180 bps over, and its 6.15% bonds due 2037 widened to 192 bps over, out 8 bps on the session. Its 5.625% notes due 2017 moved out 16 bps to the 190 area.

Martin Marietta advances from 'cheap' pricing

A trader saw Martin Marietta Materials' 6.60% notes due 2018, which priced at 295 bps over, having come in to a wide 288 bps bid, 278 bps offered.

He opined that the deal "priced way too cheap," causing the bonds to move up solidly when they were freed. "People just know it was too cheap," he said, adding "they're not really offering bonds out there much."

Financials gain

A trader said that among the financials "everything was generally better across the board, because of the earnings which were out there" - notably, JP Morgan's earnings, and those of Wells Fargo & Co., both of which declined from year-earlier levels, but beat analysts' expectations.

Sector gainers included Washington Mutual Inc., whose 5.55% notes due 2010 - one of the issues that got clobbered on Tuesday when the company warned of further charge offs over the next few years - snapped back with a vengeance, tightening by 50 bps to around the 690 bps level. Lehman Brothers Holdings' 6.20% notes due 2014 came in by about 35 bps to the 235 bps level.

Investors appeared to ignore predictions that Merrill Lynch would post wider writedowns and would have to raise additional capital. CNBC reported on the possible need to raise more capital on Wednesday, and also said that some senior people at the firm thought CEO John Thain's recent assertion that Merrill would not need to raise more capital was "ill-advised."

A trader dismissed such stories, opining: "I think these people have got to fill 12 hours of air time," and were thus coming out with all kinds of tales; "irresponsible," was one of the kinder epithets he used to describe some of the overheated projections.

He noted that in the credit-default swap spread market, the cost of protecting holders of Merrill's bonds against a possible default fell by 15 bps to 185 bps bids, 193 bps offered, despite the bearish scenarios being bandied about. In general, he said, major-bank CDS were 5 bps to 15 bps tighter, reflecting more investor confidence in the sector, while brokerage CDS costs were 15 bps to 25 bps tighter.

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