DNA Alpha sells pass-throughs; primary digests Fed comments; recent ITC Holdings notes weaken

By Aleesia Forni and Andrea Heisinger

New York, June 27 - A sale from DNA Alpha Ltd. got done in the investment grade primary market on Thursday as other issuers remained on the sidelines due to continuing volatility.

DNA Alpha - a unit of aircraft lessor Doric Nimrod Air Three Ltd. - priced $630 million of class A and B pass-through certificates. The sale had been announced on Wednesday.

It followed in the footsteps of n offering of pass-throughs by British Airways plc that priced on Monday.

The market was called "more stable" by a source at midday. This was after comments from the president of the Federal Reserve of New York, William Dudley, had come out.

Dudley said that a jump in the Fed's short-term interest rates would likely not happen for some time, and that while a scaling back of the central bank's bond buying program would likely begin later this year, the move is meant to aid the economy as it recovers.

Later, another Fed official said that if the U.S. economy improves faster than expected, the stimulus measures could be cut back accordingly.

Elsewhere, there was a sale of seven-year Treasury notes in early afternoon with the highest yield in two years.

In high-grade bonds, there is likely to be only a slow stream of supply until the week after the July 4 holiday, sources said.

"Next week there's maybe only two good days," a market source said, referring to Monday and Tuesday. "People were already planning on holding off."

Spreads in the secondary market were mostly unchanged at mid-morning, though a trader saw the recent deal from ITC Holdings Corp. trading better early during the session.

The notes traded weaker as the day wore on, according a source at another desk, who quoted the two-part issue 2 bps to 5 bps wider near the end of the session.

Meanwhile, the Markit CDX North American Investment Grade index was 2 bps tighter on the day at a spread of 86 bps.

Investment-grade bank and brokerage credit default swap costs declined on Tuesday, according to a market source.

Bank of America Corp.'s CDS costs were 4 bps lower at 130 bps bid, 135 bps offered. Citigroup Inc.'s CDS costs also declined 4 bps to 121 bps bid, 126 bps offered. JPMorgan Chase & Co. CDS costs declined 2 bps to 93 bps bid, 98 bps offered.

Wells Fargo & Co.'s CDS costs were down 2 bps at 73 bps bid, 78 bps offered.

Merrill Lynch's CDS costs lowered 4 bps to 118 bps bid, 128 bps offered. Morgan Stanley's CDS costs declined 3 bps to 169 bps bid, 147 bps offered. Goldman Sachs Group, Inc.'s CDS costs were down 4 bps at 159 bps bid, 164 bps offered.

DNA's certificates

DNA Alpha tapped the day's market for $630 million of class A and B pass-through certificates, a market source said.

The sale was announced on Wednesday.

The issuer sold $462 million of 5.25% class A certificates (A3//) due Nov. 30, 2019 at par and $168 million of 6.125% class B certificates (Baa3//) due May 30, 2023 which also sold at par.

The bookrunners for the Rule 144A and Regulation S sale were Citigroup Global Markets Inc., Goldman Sachs & Co. and Morgan Stanley & Co. LLC.

Proceeds will be used to fund the purchase of enhanced equipment trust certificates which will then buy four new Airbus aircraft to be delivered in 2013.

The unit of aircraft leasing company Doric Nimrod Air Three Ltd. is based in Guernsey, Channel Islands.

ITC notes weaker

A trader saw Wednesday's $550 million two-part issue from ITC Holdings trading wider compared to levels seen earlier during the session.

The company's $250 million of 4.05% 10-year notes, which priced at a spread of Treasuries plus 155 bps, was quoted 5 bps weaker on the day at 156 bps bid, 152 bps offered.

The $300 million tranche of 5.3% 30-year bonds was seen 3 bps weaker on the day at 172 bps bid, 170 bps offered.

ITC Holdings sold the bonds at a spread of 175 bps over Treasuries.

The power transmission company is based in Novi, Mich.

Paul Deckelman contributed to this review

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.