Xerox prices mega-deal, gains, Acuity, NiSource debut; International Paper up in heavy trade

By Paul Deckelman and Sheri Kasprzak

New York, Dec. 1 - With November's month-end adjustments not over and with just one more month to go in 2009, issuers returned to the high-grade primary market with a vengeance on Tuesday, pricing new deals having a collective face value of more than $3 billion.

Chief among them was Xerox Corp.'s $2 billion, three-part offering, which was heard by traders to have tightened smartly across all three tranches when they were freed for secondary dealings.

NiSource Finance Corp. also priced a new deal, which likewise was seen trading tighter in the aftermarket.

Some tightening was also seen in Healthcare Realty Trust Inc.'s new issue of eight-year bonds, which was upsized at pricing.

Also seen upsized was Acuity Brands Lighting Inc., which brought an offering of 10-year bonds to market. However, that deal priced too late for any secondary trading.

Secondary market activity was meantime dominated by yet another new deal - Monday's big offering from International Paper Co., which tightened up in very heavy dealings,

Among established issues in the secondary arena on Monday, a market source said the CDX Series 13 North American high-grade index had tightened by 3 basis points to a mid bid-asked spread level of 103 bps.

Advancing issues fell behind decliners, breaking their four-session winning streak, although the downsiders led the upsiders by a relative handful of issues - a couple of dozen, out of more than 4,000 issues tracked.

Spreads in general were seen tighter, in line with higher Treasury yields; for instance, the yield on the benchmark 10-year government note rose 8 bps Tuesday to 3.28%.

Overall market activity, reflected in dollar-volume totals, fell by 8.6% from Monday's pace.

Xerox leads busy session

Primary market action took off on Tuesday with billions in notes priced. The activity was led by Xerox's $2 billion sale.

"It's really busy today," said one market insider.

"I did see the Xerox deal. It's pretty much what we expected, given the ratings. No real surprises."

The offering came to market in three tranches -- $1 billion in 4.25% notes due Feb. 15, 2015; $650 million in 5.625% notes, which are due Dec. 15, 2019; and $350 million in 6.75% notes, which are due Dec. 15, 2039.

The notes (Baa2/BBB/BBB) were sold through Banc of America Securities, Citigroup Global Markets Inc. and J.P. Morgan Securities Inc.

The spread on the six-year notes came at 225 basis points over Treasuries and the spread on the 10-year notes came in at Treasuries plus 237.5 bps. The spread on the 30-year notes came in at 250 basis points over Treasuries.

The six-year notes priced at 99.808 to yield 4.289% and the 10-year notes priced at 99.725 to yield 5.661%. The 30-year notes priced at 99.588 to yield 6.782%.

Proceeds from the sale will be used to help fund the company's acquisition of Affiliated Computer Services.

Headquartered in Norwalk, Conn., Xerox is a document management company.

NiSource sells $500 million

Elsewhere, NiSource Finance Corp. brought $500 million in senior notes, according to a term sheet.

The notes (Baa3/BBB-/BBB-) were sold through Credit Suisse, Morgan Stanley & Co. and UBS.

The guaranteed notes are due March 1, 2022.

The 6.125% notes were priced at 99.569 to yield 6.177% with a spread of 290 basis points over Treasuries.

Proceeds from the sale will be leant to Northern Indiana Public Service Co. to refinance a portion of the purchase price of the Sugar Creek generating facility.

NiSource Finance is a financing subsidiary of Merrillville, Ind.-based, NiSource Inc., which supplies natural gas, electricity and other energy-related products.

Acuity brings $350 million

Also on Tuesday, Acuity Brands Lighting Inc. sold $350 million in 10-year notes in a Rule 144A private placement. The deal was downsized from a planned $400 million.

The 6% notes (Baa3/BBB-) were priced at 275 basis points over Treasuries.

Bank of America Merrill Lynch and J.P. Morgan Securities Inc. were the joint bookrunners.

Acuity Brands Lighting is a subsidiary of Atlanta lighting fixtures company Acuity Brands, Inc.

Healthcare Realty prices $300 million

In other pricing news, Healthcare Realty Trust priced $300 million in senior notes, according to a term sheet.

The 6.5% notes (Baa3/BBB-/BBB) are due Dec. 17, 2017, and were priced at Treasuries plus 387.5 basis points.

Bank of America Merrill Lynch and J.P. Morgan Securities Inc. were the joint bookrunners.

Proceeds will be used for general corporate purposes.

Healthcare Realty, based in Nashville, is an outpatient services real estate investment trust.

Otter Tail notes price

Elsewhere, Otter Tail Corp. priced its previously announced split-rated offering of $100 million in senior unsecured notes, said a term sheet.

The seven-year notes (Baa1/BB+/BBB-) were sold off the company's shelf registration.

Bank of America Merrill Lynch and J.P. Morgan Securities Inc. were the joint bookrunners.

The 9% notes were priced at 99.994 to yield 9%.

Proceeds will be used to repay a revolving credit facility. The remainder will be used for general corporate purposes.

Otter Tail, based in Fargo, N.D., offers electric utility, manufacturing, health services, food ingredient processing and infrastructure businesses.

Xerox zooms upward

A trader said that Xerox's new issue was "clearly the bond of the day."

Both in terms of sheer size, weighing in at a total of $2 billion, but also in terms of the way the new bonds firmed smartly in the secondary, with their spreads tightening accordingly.

The trader quoted the company's $1 billion of 4.25% notes due 2015 tightening to a spread versus comparable Treasury issues of 201 bps bid, 197 bps offered, versus a spread at pricing of 225 bps over, while its $650 million of 5.625% notes due 2019 were at 212 bps bid, 208 bps offered, versus 237.5 bps over at pricing.

The Stamford, Conn.-based copier and office machine king's $350 million of 6.75% bonds due 2039 meantime were seen at 240 bps bid, 235 bps offered, in some 10 bps from their 250 bps spread at pricing.

Another trader saw the five-year notes at 203 bid, 198 bps offered, the 10s at 213 bps bid, 208 offered, and the 30s at 240 bps bid, 235 bps offered.

The first trader noted that "a lot of people thought that it was priced right - that is, priced cheaply" to encourage buying.

NiSource tightens nicely

Several traders saw NiSource Finance Corp.'s 6.125% notes due 2022 having tightened to 277 bps bid - in solidly from the 290 bps over level at which the utility had earlier priced its $500 million issue.

Healthcare Realty heard tighter

A trader said that Healthcare Realty Trust's 6.50% notes due 2017 "priced on the tight side of talk" which envisioned a spread in a range of 387.5 bps to 400 bps.

After the Nashville, Tenn.-based healthcare facilities owner and mortgage provider priced its $300 million deal - upsized from the original $2590 million - at 387.5 bps over, the bonds began tightening immediately, to 382 bps over, and later, "looked like they continued tightening," to 379 bps,

International Paper tighter in heavy trading

Monday's $750 million offering of 7.30% bonds due 2039 from International Paper was easily the most active bond of the day on Trace, a trader said, seeing some $200 million changing hands.

The Memphis paper manufacturer's deal - upsized from its original $500 million -- was heard to have tightened Tuesday to 296 bps bid, 297 bps offered , in solidly from the 312.5 bps level at which it had priced on Monday.

There was "just tons of activity," in the issue, much of it in blocks of multiple millions, especially blocks of $5 million and up.

The trader saw the company's more established 7½% notes due 2021 also hugely active, with $87 million of turnover.

Those bonds had firmed 10 bps to 280 bps over, versus 290 bps at the most recent round-lot transaction several days ago.

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