Apache prices deal; nerves return to primary; Morgan Stanley wider, Wachovia, JPMorgan see movement

By Andrea Heisinger

New York, Sept. 26 - The issuance window was shut in the investment-grade bond market Friday as optimism the day before went back to uncertainty overnight.

At the market close Thursday, sources said there were potential issuers eyeing the market as a U.S. government bailout plan for the financial sector seemed imminent. Then, later Thursday night, that plan met opposition and talks stalled.

That, coupled with the complete collapse of Washington Mutual bank and the subsequent buyout by JPMorgan Chase & Co., again virtually shut down the market amid uncertainty.

The secondary was mixed, with moderate volume, a source said.

Apache prices two tranches

Houston oil and natural gas exploration company Apache Corp. priced $800 million of notes in two tranches late Friday amid an uncertain market tone.

The deal consisted of $400 million of 6% five-year notes priced to yield Treasuries plus 310 basis points and $400 million of 6.9% 10-year notes also priced to yield Treasuries plus 310 bps.

Full terms were not available at press time due to the lateness of the pricing.

Bookrunners were Goldman Sachs & Co. and J.P. Morgan Securities Inc.

It was "a good trade," a source close to the deal said. It followed in the footsteps of Thursday's issue from Houston-based EOG Resources Inc., which was similar in both credit ratings and structure, the source said.

The Apache issue was well-received, he said, and about two times oversubscribed.

Uncertainty returns to IG

At Friday's market close, there was still no sign of a bailout plan from Congress as talks fell apart Thursday night.

"We all thought it was going to be done Friday," a source said. "I went to get dinner last [Thursday] night, and when I came back it fell apart."

That was magnified by the failure of Washington Mutual bank, which was seized by the government and sold to JPMorgan Chase, one of the bidders the government had been working with recently.

The gradual collapse of WaMu - the largest bank failure in U.S. history - was not a surprise to most syndicate desks, a source said. What did surprise some were the terms of the buyout.

"People knew something had to be done," a source said. "What were surprising were the terms and what happened to the senior bondholders."

The coming week is uncertain, after the market partially regained its footing this week as issuers thought a bailout plan was close to being finalized.

When that fell apart, many went back to waiting on the sidelines watching market conditions, a source said.

"There needs to be some clarity about the bailout," he said. "I can't imagine there wouldn't be something by the open Monday."

House Republicans objected to the structure of the plan Thursday night, leading to the unraveling.

Lawmakers met again Friday to try to work out their differences and have said they will continue working through the weekend instead of adjourning as was planned.

The president, as well as Treasury secretary Henry Paulson, again pushed for a plan to be finalized by the market open Monday, fearing the worldwide repercussions if that doesn't happen.

Meanwhile Friday, instead of handling new issues that were expected, those on syndicate desks talked to nervous investors and prospective issuers.

"We did a lot of market update calls," a source said. "People are going to come in Monday hoping for the best. It's really back to a day-to-day call."

Week sees $5 billion issuance

There were $5.36 billion in new issues during the past week, most pricing Wednesday and Thursday.

All of the names were highly rated and most were energy or utility companies.

It is issues like these that will eventually allow for lower-rated names to come back into the market, a source said, although it's unclear how long the rehabilitation of the corporate bond market will take.

Utilities tighten in secondary

Bond issues from both South Carolina Electric & Gas Co. and Wisconsin Electric Power Co. were seen tighter Thursday, a day after pricing.

South Carolina's 6.5% 10-year notes priced at 265 bps and were seen about 5 bps tighter at 260 bps bid, 257 bps offered.

Wisconsin Electric's 6% notes due 2014 were at 296 bps bid from pricing at 300 bps.

Peco, EOG bonds come in

Thursday's issue of 5.6% five-year bonds from Peco Energy Co. was seen tightening to 257 bps offered Friday afternoon from pricing at 262.5 bps.

The two tranches of notes from EOG Resources were also seen tighter Friday afternoon.

The 6.125% five-year notes were at 305 bps bid, 285 bps offered from 310 bps pricing.

The 6.875% 10-year notes moved similarly, to 305 bps bid, 295 bps offered, from 310 bps pricing.

JPMorgan bonds wider

Outstanding bond issues from JPMorgan Chase were seen generically wider Friday afternoon, after Thursday's buyout of Washington Mutual for $1.9 billion.

The deal was somewhat brokered by the federal government after WaMu collapsed, with the government looking at potential sellers for the past couple of weeks.

Washington Mutual was hit hard by mortgage losses and other risky credit lending. It was the largest bank collapse in U.S. history.

GE bonds widen

After Thursday's conference call update on General Electric finances, the company's bonds were generically wider Friday, a secondary source said.

The company was looking cautiously forward and taking proactive measures to avoid losses and maintain its AAA credit rating.

Among these steps was a decision to not issue any more long-term debt in 2008. The company's CEO and chairman, Jeff Immelt, said GE has already issued $70 billion of the intended $80 billion for the year and does not need to issue the remaining amount.

Wachovia tops most actives

Wachovia Corp. was on top of the day's most active trades Friday afternoon after word came that the financial services company is in early talks to merge with Citigroup.

Wachovia's 5.5% notes due 2013 were the most active, with the company's 5.75% notes due 2018 and 5.3% notes due 2011 on its heels.

Morgan Stanley was also well-represented toward the top of the list, as the company's CEO said Friday that talks to sell a stake to Mitsubishi UFJ Securities were moving forward.

Morgan Stanley sharply wider

Morgan Stanley's 6.6% bonds due 2012 were seen widening more than 200 bps Friday afternoon, even with assurances from the company's CEO that talks with Mitsubishi UFJ to raise capital were still on.

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