Goldman, Morgan Stanley, Noble, Ralcorp sell bonds; secondary focuses on new bank paper

By Andrea Heisinger and Cristal Cody

New York, July 21 - The high-grade bond market jumped back to life on Wednesday after a drowsy start to the week. Goldman Sachs Group, Inc., Morgan Stanley and Ralcorp Holdings, Inc. priced bonds following earnings announcements, and Noble Holding International Ltd. and the European Investment Bank also got deals done.

Goldman Sachs was one of the first to price its deal. The financial giant sold $3 billion of notes in two tranches, including the reopening of its 6% notes due 2020.

Fellow financial giant Morgan Stanley announced fairly late in the day that it would sell notes, following its solid second-quarter earnings announcement before the open. It sold $3 billion of notes in two tranches, including $1.25 billion of five-years and $1.75 billion of 10-years.

EIB was the first to price its bonds for the day, with a $3 billion sale of notes due 2013.

Noble Holding and Ralcorp each priced their deals late, after the market close.

Noble sold $1.25 billion in tranches of five-year, 10-year and 30-year maturities. Ralcorp did a smaller deal of $700 million in two tranches, including the reopening of its 6.625% bonds due 2039.

There was "no one reason" why issuers were again pricing bonds, a market source said.

"I think there's some enthusiasm on Morgan Stanley and the financial reg. bill," he said.

The previous day had seen the market drop and then rebound after a handful of disappointing earnings announcements before the open.

There are more deals expected on Thursday, provided the market holds.

One syndicate source who worked on two of the day's sales said that it was "good to be busy, even for a day."

The new paper from Goldman Sachs, Morgan Stanley and Noble Holding traded stronger overall in the secondary market, sources said.

"Pretty much everybody was focused on the Goldman deal and the Morgan Stanley deal and Bernanke," a source said. "The secondary market was a little bit weaker because of that, but overall, it was a nonevent leading up to the [Federal Reserve chairman Ben Bernanke's] comments at 2 o'clock."

Overall investment-grade Trace volume rose 25% to more than $14 billion on Wednesday, a source said.

"Volume's good," a source said.

The CDX Series 14 North American investment-grade index eased 2 bps to a spread of 112 bps, according to a source.

U.S. Treasuries rallied as stocks faltered on renewed economic uncertainty after Bernanke's comments on Wednesday.

The rally sent yields down, with the yield on the benchmark 10-year note yielding 2.88%, compared to 2.95% the previous day.

The yield on 30-year debt firmed 9 bps to 3.89%.

"Treasuries are pretty much on fire," a trader said. "The comments from Bernanke gave no clear-cut explanation. Everybody's waiting for some clear-cut decision to be made."

Bernanke testified on Wednesday before the Senate Banking Committee that the economy faced an uncertain future, but the Fed is prepared to take additional policy actions.

Bernanke also will testify before a House panel on Thursday.

Goldman prices $3 billion

Goldman Sachs sold a benchmark $3 billion of notes (A1/AA) in two tranches in the early afternoon, a market source away from the deal said.

The deal was originally announced as a sale of new five-year notes, but a reopening of a 10-year note was added when it was launched.

The $2.25 billion 3.7% five-year notes sold at a spread of Treasuries plus 205 bps.

The company also reopened its 6% notes due 2020 to add $750 million. The notes were priced at 230 bps over Treasuries.

Total issuance for these notes is $2 billion, including $1.25 billion priced on May 26 at 280 bps over Treasuries.

The bookrunner was Goldman Sachs & Co.

Goldman reported second-quarter earnings that were down more than 80% from the same period a year ago. Net income was $613 million, down from $3.43 billion in Q2 2009. Some analysts said low trading profits and the $550 million fraud settlement with the Securities and Exchange Commission may have factored in.

The financial services company is based in New York City.

Morgan Stanley sells two tranches

Morgan Stanley priced $3 billion of senior unsecured notes (A2/A/A) in two tranches by late afternoon, a syndicate source away from the sale said. The company had announced its second-quarter earnings in the morning.

A $1.25 billion tranche of 4% five-year notes priced at Treasuries plus 245 bps.

The $1.75 billion tranche of 5.5% 10-year notes sold at a Treasuries plus 270 bps spread.

A source said he didn't see any price talk on the deal since it was announced in the afternoon and priced soon after.

The bookrunner was Morgan Stanley & Co. Inc.

The company beat analyst expectations with its Q2 numbers. Net income was reported at $1.58 billion, after losing $1.26 billion a year ago. Although a loss of trading revenue was said to have hurt Goldman Sachs for the quarter, it was credited with helping Morgan Stanley regain its footing.

The financial services company is based in New York City.

Earnings announced

At least a few of the recent issuers in the investment-grade market priced bonds soon or immediately after they announced earnings.

Some were financials that were looking to take advantage of low rates and to raise cash and shore up capital in light of the financial reform bill that was signed into law by President Barack Obama on Wednesday.

"It makes sense," one source said late in the day. "Some of them didn't do to stellar [in earnings]. I would guess we could see more from companies."

Charles Schwab Corp. priced $600 million of 10-year notes on Monday after the brokerage firm had reported OK earnings the previous trading day.

The previous week saw JPMorgan Chase & Co. announce upbeat earnings and price $2.9 billion of bonds in two tranches on the same day.

Some of these financials especially may not have a specific reason to issue bonds, but did so because of the low rates and positive tone, a source said. The non-financials are likely pricing bonds after exiting earnings blackout due to a need, such as an acquisition or debt maturity, he added.

Noble Holding offers $1.25 billion

Noble Holding International sold $1.25 billion of senior notes (Baa1/A-/A-) in three tranches late in the afternoon, an informed source said.

The $350 million of 3.45% five-year notes priced at a spread of Treasuries plus 180 bps.

A $500 million tranche of 4.9% 10-year notes sold at 205 bps over Treasuries.

The third tranche was $400 million of 6.2% 30-year bonds priced at a 230 bps over Treasuries spread.

The deal is guaranteed by parent company Noble Corp.

All of the tranches were talked in the area of 20 bps higher than where they priced, a source said.

There was heavy demand for the deal, with about $11.5 billion on the books, he said.

Barclays Capital Inc., SunTrust Robinson Humphrey and Wells Fargo Securities LLC were the bookrunners.

Proceeds are being used to finance a portion of the pending acquisition of FDR Holdings Ltd, along with cash at hand and borrowings under a revolving credit facility. They will also be transferred to Noble-Cayman as advances, distributions, repayment of outstanding intercompany debt or a combination of these things.

The company's last debt sale was $250 million of five-year notes priced on Nov. 18, 2008 at 525 bps over Treasuries.

The holding company for the owner of mobile offshore drilling units is based in the Cayman Islands.

Ralcorp prices, reopens bonds

Ralcorp Holdings sold $700 million of senior notes (Baa3/BBB-/BBB-) in two tranches late in the day, a source close to the deal said.

The $450 million of 4.95% 10-year notes priced at a spread of Treasuries plus 210 bps. The notes were talked much wider, in the 225 bps area.

The company also reopened its issue of 6.625% notes due 2039 to add $250 million. The notes priced at Treasuries plus 255 bps. This tranche was also priced tighter than guidance in the 262.5 bps area.

Total issuance of the notes is $550 million, including $300 million priced on Aug. 11, 2009,at 220 bps over Treasuries.

Both tranches are guaranteed by certain subsidiaries.

Credit Suisse Securities, J.P. Morgan Securities and Wells Fargo Securities were active bookrunners.

Proceeds will be used to finance a portion of the proposed $1.2 billion acquisition of American Italian Pasta Co.

The St. Louis-based maker of breakfast cereal and food products reported fiscal third-quarter earnings on Tuesday. Net income was reported at $53 million, which was a drop from $74.8 million a year ago. Acquisitions in the time period between, including the pending one of American Italian Pasta, were given as a reason for the decrease.

EIB sells $3 billion

European Investment Bank sold $3 billion of 1.25% notes (Aaa/AAA/AAA) due 2013 early in the day at Treasuries plus 42.88 bps, a market source said.

The bookrunners were Deutsche Bank Securities, Goldman Sachs & Co. Inc. and Morgan Stanley & Co. Inc.

The lending bank for the European Union is based in Kirchberg, Luxembourg.

Goldman tighter in secondary

Secondary traders were waiting all afternoon for the new paper from Goldman and Morgan Stanley, source said.

Goldman's 3.7% notes due 2015, which priced at Treasuries plus 205 bps, "are right now 201, 198," a trader said.

The reopening of the 6% notes due 2020 priced at Treasuries plus 230 bps and traded in the secondary at 222 bps bid, 215 bps offered, the trader said.

Late afternoon, the 10-year notes were seen trading at 223 bps bid, 218 bps offered, another trader said.

Morgan Stanley firms

Morgan Stanley's new notes were firmer in secondary trading on the offer side, according to sources.

The 4% notes due 2015 priced at Treasuries plus 245 bps and traded in the afternoon at 247 bps bid, 244 bps offered.

In the late afternoon, a trader saw an offer of 271 bps on the five-year notes.

Morgan Stanley priced the tranche of 5.5% notes due 2020 at Treasuries plus 270 bps.

"The 10-years are 272 bid, 268 offered," a trader said.

Later the 10-year notes were seen by another trader at an offer of 271 bps.

Noble Holding stronger

Noble Holding's three tranches of notes firmed in late afternoon trading, a source said.

The company priced the notes due 2015 at Treasuries plus 180 bps, notes due 2020 at a spread of 205 bps and bonds due 2040 at Treasuries plus 230 bps.

"The five-year is around 160 - probably 10, 15 tighter," a trader said. "The market received those well, it looks like."

Another trader heard the tranches "launched quite a bit tighter than guidance. Just saw the 30-year offered at 208."

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