Noble Energy, Woodside bring $1 billion each; Baxter trades well; financials weaker but rebound

By Paul Deckelman and Paul A. Harris

New York, Feb. 24 - Two energy names highlighted Tuesday's comparatively muted primary market.

Noble Energy, Inc. priced $1 billion of 10-year notes while a financing arm of Australia's Woodside Petroleum Ltd. brought $1 billion in two tranches.

In the secondary sphere on Tuesday, a market source said the widely followed CDX Series 11 North American high-grade index tightened to a mid bid-asked spread level of 215 basis points, versus 218 bps on Monday.

Advancing issues remained behind decliners, by a six-to-five ratio.

Overall market activity, reflected in dollar volumes, zoomed by nearly 80% from the levels seen on Monday.

Spreads in general tightened a little Tuesday as Treasury yields rose; for instance, the yield on the benchmark 10-year issue was out by 3 bps to 2.79%.

The market started wider in the morning, according to an investment banker who works on a syndicate desk. But some short covering surfaced on Tuesday afternoon, however, so high-grade spreads were marginally tighter on the day, the official added.

Monday's new deals were seen trading around the market Tuesday, with Baxter International Inc.'s new issue clearly the best performer; in contrast, Western Union Co.'s deal was seen little changed from the spread over comparable Treasuries at which those bonds priced. Waste Management Inc. and Hewlett-Packard Co.'s new issues were mixed.

Financial bonds initially widened out on continued investor concern over the possibility of government nationalization of such names as Citigroup and Bank of America, but by the afternoon, as market fears dissipated, that sector pretty much tightened from its early wides.

Price talk marches higher

Both the energy deals in Tuesday's primary market tested the waters at spreads well below those which eventually surfaced in the final deal terms.

Noble Energy, Inc. priced $1 billion of 8¼% 10-year notes at a 550 bps spread to Treasuries, according to market sources.

The spread came on top of the mid-500 bps price talk. However earlier Tuesday, in London, the deal was being shopped in the context of Treasuries plus low-500 bps area.

The notes (Baa2/BBB) came at 99.529 resulting in an 8.32% yield to maturity.

Deutsche Bank Securities and JPMorgan were the active bookrunners. Barclays Capital, RBS Greenwich Capital and UBS Investment Bank were the passive bookrunners.

Proceeds will be used to repay bank debt.

Meanwhile Woodside Finance Ltd., the financing arm of Australia's Woodside Petroleum Ltd., priced $1 billion of notes (Baa1/A-) in two tranches on Tuesday.

The deal included $400 million of 8 1/8% five-year notes that priced at a 625 basis points spread to Treasuries, and $600 million of 8¾% 10-year notes that priced at a spread of 612.5 bps.

The deal had been in the market all day Monday, according to a source who added that price guidance marched significantly higher throughout that session. Initial guidance came in the context of a mid-500 bps spread. One account reported hearing guidance as low as the 500 bps area.

Late Tuesday morning, New York time, official talk surfaced: the five-year paper was talked at Treasuries plus the 625 bps area while the 10-year talk was Treasuries plus 600 bps to 625 bps. Hence the five-year paper came on top of talk while the 10-year paper came in the middle of talk.

The five-year paper was priced at 99.969 and yields 8.133%.

The 10-year paper came at 98.847 to yield 8.925.

Credit Suisse, JPMorgan and UBS Investment Bank were the managers.

Proceeds will be used for general corporate purposes including the funding of Woodside Petroleum's capital expenditures program.

The issuer is headquartered in Perth.

"Deals still seem to be getting done," a syndicate official commented shortly after the Tuesday close.

"If there is any market that is going to be fairly well insulated it's going to be the investment grade market."

Vanderbilt taxable deal

Vanderbilt University in Tennessee priced $250 million of 5 ¼% 10-year taxable at a 250 basis points spread to Treasuries, on top of the price talk, according to market sources.

The notes were sold at 99.814 to yield 5.273%.

Morgan Stanley & Co. Inc. was the senior manager of the negotiated sale. Merrill Lynch & Co. was the co-manager.

The proceeds will be used for working capital and cash management needs, as collateral to secure the university's obligations under hedge agreements and to terminate hedge agreements, to provide liquidity to support debt obligations and to acquire and construct improvements for university facilities.

And KfW priced $1.5 billion two-year floating-rate notes at par to yield three-month Libor plus 27.5 basis points, according to a 424B3 filing with the Securities and Exchange Commission.

Goldman Sachs International and Morgan Stanley & Co. Inc. were the bookrunners.

The government-owned bank is based in Frankfurt, Germany.

Baxter shows healthy gain

Among Monday's new issues, Baxter International's 4% notes due 2014 were seen having tightened to a spread of 205 bps bid.

The Deerfield, Ill.-based supplier of healthcare products priced $350 million of those bonds at 222 bps over.

Waste Management tightens up

Another gainer was Waste Management Inc.'s new 7.375% notes due 2019, which were quoted at 452 bps bid, 448 bps offered, versus the 462.5 bps spread at which the Houston-based waste collection and disposal company had priced the $450 million of bonds on Monday.

However, the other half of that $800 million deal - its $350 million of 6.375% notes due 2015 - were quoted offered at 456 bps over, with no bid, not far from the 462.5 bps spread at which that tranche had also priced.

Hewlett-Packard deal mixed

Hewlett-Packard's $1 billion of 4.25% notes due 2012, which had priced at 295 bps over, were seen essentially unchanged at 294 bps bid, 289 bps offered.

However, the Palo Alto, Calif.-based computer and peripherals manufacturer 's $1.5 billion of 4.75% notes due 2014, which had also priced at 295 bps over, tightened to 277 bps bid, 270 bps offered, a trader said.

Western Union little changed

Western Union's new 6.50% notes due 2014 were seen trading at 475 bps bid. That is the same spread at which the Englewood, Colo.-based communications and financial services company had priced its $500 million of new bonds on Monday.

Cisco bonds mixed

Among other recently priced issues, a market source saw Cisco Systems Inc.'s 4.95% notes due 2019 trading at 240 bps bid, 25 bps wider on the session and well above the 200 bps level at which the San Jose, Calif.-based networking and communications technology company priced its $2 billion of bonds on Feb. 9.

However, Cisco's new 5.90% bonds due 2039 tightened by 23 bps on the day to 246 bps. That was still well wide of the 225 bps spread at which the company priced that $2 billion of bonds.

Unilever widen out

Also wider than its issue price was Unilever plc's 4.80% notes due 2019, quoted 227 bps over. The Anglo-Dutch consumer products giant priced $750 million of the bonds at 180 bps over on Feb. 9 as part of a two-tranche $1.5 billion deal.

Financials bounce back

In the financial sector, a trader said that bank bonds were "grinding tighter" late in the day, as they recovered from initial weakness seen during the morning hours.

He saw B of A's 5.65% notes due 2018 "trading in a world of their own, very technical." He said the Charlotte, N.C.-based banking giant's bonds started the day at 565 bps bid, but had tightened by day's end to 550 bps.

But he saw the company's 5.30% notes due 2017 trade wide of 700 bps, even though "they're higher up in the capital structure."

He saw Goldman Sachs Group Inc.'s 7.50% notes due 2019 offered at 450 bps; earlier in the day, he saw them as wide as 480 bid.

He saw General Electric Capital Corp.'s bonds wider on the day - but still tighter than the wide points they hit earlier. "Everything's off their wides - though they're definitely wider" overall; the GECC 5% notes due 2013 were offered at 350 bps, versus recent levels at 290 bps.

He saw the general improvement in the sectors bonds as being "related to the stock market," where banking shares, after some early weakness on investor concerns about the industry, roared back later on, helped by Federal Reserve chairman Ben Bernanke's statements trying to assure the industry of continued Fed support - but not government nationalization of the banks.

Another factor, he declared, was "the fact that Bernanke didn't say anything that would screw things up."

Financial CDS level improve

A trader who watches the credit default swaps market saw the cost of protecting bank and brokerage bonds against a default anywhere from unchanged to 15 bps tighter; CDS costs across the sector had been wider in the morning, but then came back in as the bonds themselves, and the companies' shares, firmed.

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