Nov. 5 (Bloomberg) -- Altria Group Inc., the maker of Marlboro cigarettes, sold $6 billion of notes in the company's biggest ever bond sale and the largest deal in the U.S. market since May.

Altria's sale is almost equal to the $6.7 billion of issuance in all of last week, according to Bloomberg data. The largest U.S. tobacco maker sold the debt in three-parts as yields over benchmark rates on corporate bonds fell for a second day.

``There is a trickle of new deals coming in,'' said Scott MacDonald, head of research at Aladdin Capital Management LLC in Stamford, Connecticut, which manages about $17 billion in assets. ``The bond market is open for a limited number of companies that have demonstrable cash flow.''

Companies have been effectively shut out of the market since the credit seizure deepened in September. October was the slowest month for investment-grade issuance since July 2002, according to Bloomberg data. Yields over benchmark rates on investment-grade debt are near record highs.

The extra interest investors demand to own investment-grade bonds fell 8 basis points to 595 basis points today, the lowest in two weeks, according to Merrill Lynch & Co.'s U.S. Corporate Master index. A basis point is 0.01 percentage point.

Illinois Power

Altria, which makes one of every two cigarettes sold in the U.S., became the first investment-grade borrower with ratings below A from both Moody's Investors Service and Standard & Poor's to sell debt since Illinois Power Co. raised $400 million on Oct. 20.

Altria's notes are rated Baa1 by Moody's, the eighth level of investment quality, and an equivalent BBB+ by S&P, according to a regulatory filing.

The debt sale was the biggest since Altria's former unit, Philip Morris International Inc., sold $6 billion of debt on May 13. Altria spun off New York-based Philip Morris International in March.

The offering included $1.4 billion of 8.5 percent 5-year notes, $3.1 billion of 9.7 percent 10-year notes and $1.5 billion of 9.95 percent 30-year bonds, according to data compiled by Bloomberg. All three issues priced to yield 600 basis points more than similar U.S. Treasuries, the data shows.

Altria will use the proceeds to finance its $10.3 billion acquisition of Stamford, Connecticut-based snuff maker UST Inc., according to the filing.

Richmond, Virginia-based Altria said Oct. 3 it may not complete the deal this year because its lenders ``preferred'' the acquisition close in 2009. Altria received $7 billion in financing from Goldman Sachs Group Inc. and JPMorgan Chase & Co.

Poison Put

The bonds have a so-called poison put that would allow investors to sell them back to the company at 101 cents on the dollar if there is a change of control at Altria. They also contain a ``step-up'' so that the coupon will increase by 0.25 percentage point with each cut below investment-grade quality, according to the filing.

Altria last sold debt in October 2003, issuing $500 million of senior unsecured 5.625 percent notes that priced to yield 245 basis points more than similar Treasuries. The notes matured yesterday, Bloomberg data show. The company also sold $1 billion of 10-year 7 percent notes that paid a spread of 265 basis points. A basis point is 0.01 percentage point.

Citigroup Inc., Goldman and JPMorgan managed the sale, according to the filing.

To contact the reporters on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net; John Detrixhe in New York at jdetrixhe@bloomberg.net

Last Updated: November 5, 2008 18:38 EST