June 20 (Bloomberg) -- Time Warner Cable Inc., the second- largest U.S. cable operator, and Johnson & Johnson, maker of Acuvue contact lenses, led $18.1 billion of corporate bond sales as credit writedowns and soaring fuel costs increased concern that the U.S. economy is in a recession.

Sales remained below the year's $22.4 billion weekly average for a fourth straight week, though rose from $13.8 billion last week. Time Warner Cable sold $5 billion of bonds to help finance a cash dividend and separate from its parent. New Brunswick, New Jersey-based Johnson & Johnson, one of six non-financial borrowers with top AAA rankings, sold $1.6 billion of debt.

Banking woes undermined investor confidence in a credit- market recovery as Lehman Brothers Holdings Inc., the fourth- largest U.S. securities firm, reported a loss of $2.8 billion and Fifth Third Bancorp, Ohio's second-largest lender, slashed its dividend and said most of its quarterly profit will evaporate.

``I think there's a little more skepticism underneath as people continue to peel the layers here,'' said Jeff Houston, vice president and senior portfolio manager at American Century Investments in Mountain View, California, who helps manage $21 billion of assets.

Record oil prices raised concerns that higher energy bills will erode corporate earnings and slow consumer spending. FedEx Corp., the second-largest U.S. package-shipping company, reported its first quarterly loss in 11 years as increases in fuel surcharges failed to keep up with costs. Miami-based Carnival Corp., the largest cruise-line company, lowered profit estimates for the year in part because of soaring fuel costs.

Investment Grade

Overall corporate bond sales in the second quarter have fallen to $341 billion from $352 billion a year ago and compare with $221 billion in the first quarter, according to data compiled by Bloomberg. U.S. investment-grade offerings have risen to a record $313 billion from $293 billion last year and $211 billion in the first quarter.

The extra yield investors demand to own investment-grade bonds rather than U.S. Treasuries of similar maturity widened 1 basis point this week to 250 basis points, according to Merrill Lynch & Co.'s U.S. Corporate Master Index. Overall yields fell 6 basis points to 6.42 percent from the highest in six years. A basis point is 0.01 percentage point.

Sales of high-grade debt rose to $15.7 billion this week, compared with $12.8 billion last week, Bloomberg data show.

Time Warner Cable's sale, tied for the year's third-biggest by a non-financial company, was split among $1.5 billion each of 5-year, 6.2 percent notes and 30-year, 7.3 percent debt and $2 billion of 10-year, 6.75 percent bonds. The notes pay coupons 75 basis points to 90 basis points higher than the last time the company sold debt in April 2007, or $41.3 million more in annual interest payments.

One-Time Dividend

New York-based Time Warner Inc., pressured by investors to break up, in May said it would spin off its cable-television unit, which agreed to pay a one-time dividend of $10.9 billion to its parent and other shareholders.

Johnson & Johnson issued its notes at spreads below the average among companies in its credit class. The world's largest health-products company sold $900 million of 10-year, 5.15 percent notes that priced to yield 103 basis points more than Treasuries, and $700 million of 30-year, 5.85 percent bonds that paid a spread of 113 basis points, Bloomberg data show.

The yield over benchmark rates that AAA rated Johnson & Johnson paid on its 10-year notes rose 26 basis points since its last issue in August 2007, and the yield on its 30-year bonds rose 17 basis points. The average spread among AAA rated companies rose 67 basis points between the two issues, according to Merrill Lynch & Co.'s U.S. Corporate Master Index.

High-Yield

Frankfurt-based KfW Group, the German government-owned finance agency, sold $3 billion of three-year notes in dollars. The 3.75 percent debt priced to yield 28 basis points less than the benchmark mid-swap rate, Bloomberg data show.

Sales of high-yield, high-risk debt jumped to $2.5 billion from $961 million a week ago with eight junk-rated issuers tapping the market. High-yield issuance this quarter has plunged to $28 billion from $58.8 billion last year, though up from $10 billion in the first quarter.

Spreads on high-yield bonds widened 14 basis points this week to 653 basis points, according to Merrill's U.S. High-Yield Master II index. High-yield, or junk-rated, debt is ranked below Baa3 by Moody's Investors Service and lower than BBB- by Standard & Poor's.

Energy Industry

Petrohawk Energy Corp., an oil and gas producer, sold $300 million of 7.875 percent senior notes in a reopening that priced at a discount of 98.75 cents on the dollar. The notes came at a spread of 418 basis points, 37 basis points less than the initial offering last month. The notes are rated B3 by Moody's, six levels below investment grade, and a step higher at B by S&P.

``The energy industry has been a little isolated in terms of what's going on,'' said Mark Mize, chief financial officer of Houston-based Petrohawk. ``It hasn't had any impact on our ability to raise capital.''

AEI, the Houston-based owner and operator of energy assets, and Oak Hill Capital Partners LP are among borrowers seeking to raise at least $24.5 billion of bonds in the U.S., according to data compiled by Bloomberg.

To contact the reporters on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net; Bryan Keogh in New York at bkeogh4@bloomberg.net

Last Updated: June 20, 2008 15:24 EDT