Goldman Sachs, Xcel Energy, NIB, MBIA price issues to wrap week of more than $42 billion volume

By Andrea Heisinger and Paul Deckelman

Omaha, Jan. 11 - The week ended with more new investment-grade issues than typical for a Friday, with Nordic Investment Bank, Goldman Sachs Group, Xcel Energy Inc. and MBIA Insurance Corp. pricing.

The week's new issues totaled more than $42 billion, according to one market source. This brings the total for January so far to more than $54 billion.

In the investment-grade secondary market, advancing issues outpaced decliners by a nearly seven-to-five margin. Overall market activity - reflected in dollar volume - jumped some 41% from Thursday's levels.

A trader said that the new Goldman Sachs bonds which priced during the session had tightened when they moved into aftermarket trading.

Elsewhere in the financial sector, Bank of America's bonds, after initially tightening solidly on the news of its planned acquisition of Countrywide Financial Corp., gave back those gains, and then some.

Countrywide's own bonds - nominally investment-grade even though they've been quoted in dollar prices and trading at distressed junk-like levels for months - continued the firming trend seen Thursday.

Among the non-financial bonds, a trader saw United Parcel Service Inc.'s mega-deal, which priced on Thursday as "a big driving force," having firmed smartly in aftermarket dealings. More modest gains were seen in the new Canadian National Resources bonds.

Nordic sells $1.25 billion

Nordic Investment Bank priced an upsized $1.25 billion in notes, increased from $1 billion.

The 3.125% three-year global notes priced at 99.841 to yield 3.179% at a spread of Treasuries plus 55 basis points.

Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and RBC Capital Markets ran the books.

Goldman Sachs priced $3 billion in 5.95% 10-year global notes at 99.858 to yield 5.969% at a spread of Treasuries plus 215 bps.

Goldman Sachs & Co. was bookrunner.

They priced in line with price talk, which was 215 bps, a source close to the deal said.

The investment bank paid about 30 bps new issue premium, a market source said.

MBIA pays 14%

News of an issue from MBIA Insurance Corp. surfaced Wednesday, with the company announcing it would price $1 billion in surplus notes to boost its ratings to triple-A.

The Rule 144A issue had trouble taking flight, however, and did not price Thursday as expected.

It also ended up at a large coupon of 14%, priced at par.

One source observed that the deal got done at a distressed yield after failing to get it into the market Thursday at a coupon between 9% and 12%.

This is about two times the interest rate a comparably rated company could expect to pay, the source said.

One source said there would likely be some interest from high-yield investors because of the coupon, but wasn't sure how much.

J.P. Morgan Securities, Lehman Brothers Inc. and Morgan Stanley & Co. Inc. were bookrunners.

Xcel juniors at 7.6%

Xcel Energy priced $400 million in 7.6% 60-year junior subordinated notes priced at par of $25.

Morgan Stanley & Co. Inc., Citigroup and J.P. Morgan ran the books.

Another issue came from Brazilian steel producer Usinas Siderurgicas de Minas Gerais SA, with $400 million 7.25% 10-year bullet bonds priced at 99.127 with a spread of Treasuries plus 356 bps.

J.P. Morgan and UBS Investment Bank ran the books.

A split-rated issue from Jabil Circuit Inc. was downsized to $250 million from $300 million.

The 8.25% 10-year senior notes priced at 99.965 at a spread of Treasuries plus 447 bps.

The Rule 144A issue priced at the coupon it was launched at.

Bookrunners were Citigroup and J.P. Morgan.

The strong week of new issues was marred only by a day of negative tone Wednesday that scared off some issuers. Those who held off came to the market Thursday.

Other issuers for the week included United Parcel Service Inc. and General Electric Capital Corp., each with multi-billion dollar and multi-tranche offerings.

The $6 billion issue from GE opened up the field for other issuers who were holding off to see who would get into the market.

"They took a big chunk out of things, and were kind of the guinea pig to show people that something that size could be done," a market source said.

Canadian Natural Resources Ltd., KfW, Berkshire Hathaway Finance Corp., National Australia Bank, European Investment Bank and ANZ National International Ltd. were other companies that issued $1 billion or more.

Those under that mark included Florida Power & Light Co., Prudential Financial, Inc., Block Financial LLC, The Kroger Co., Duke Energy Carolinas, LLC, Alabama Power Co., Emerson Electric Co., Buckeye Partners, L.P. , Questar Pipeline Co. and Commonwealth Edison Co.

The coming week should have plenty of issuers, but likely won't have as high of volume as this week with backlog coming out.

"Next week will be a big week for banks for sure," a market source said. "I don't know who exactly will be coming out."

This week held deals that one source said he didn't see coming, such as UPS. The coming week could also see some surprise issuers, he said.

"I think we're going to see a number of other financials coming out," he said. "The banks are not finished."

Goldman tighter in trading

When the new Goldman Sachs 10-year notes reached the secondary market, a trader saw them having firmed to 207 basis points bid, 204 bps offered, after having priced earlier in the session at 215 bps over comparable Treasuries.

B of A gives up gains

Elsewhere in the important financial sector, B of A's widely traded 5.75% notes due 2017 were seen by a market source around midday trading as tight as 132 bps - a significant narrowing from the 175 bps level at which those bonds had traded on Thursday afternoon. However, by the end of the day, the bonds had coughed up all of those handsome gains and then some, seen having widened to 182 bps.

A trader meantime said that he had seen the cost of debt protection on B of A paper having widened out to 85 bps bid, 91 bps offered, which he called a rise of about 6 or 8 bps on the day. Major ratings agencies said they would likely equalize the ratings of the two companies when the Countrywide deal closed, but said that B of A faces some significant challenges in turning the mortgage company around.

Countrywide's bonds, meantime, started moving upward from the get-go, fueled by the 7 a.m. ET announcement that 16%-owner B of A will indeed buy the 84% of Countrywide that it does not already own in an all-stock transaction worth about $4 billion, an estimated 70% discount to Countrywide's book value. That announcement confirmed what had pretty much been expected in the markets the day before, when the mortgage company's bonds shot up dramatically. With most of the upside having been notched on Thursday - its widely traded 6¼% notes due 2016, for instance, had zoomed nearly 40 points on the session, from about 40 bid at Wednesday's finish to just under 80 - Friday's gains were less dramatic, though still substantial.

A trader saw Countrywide's 3¼% notes coming due this May at 96 bid, 97 offered, which he called up only slightly from 95 bid, 96 on Thursday, and saw the 6¼% notes at 85.5 bid, 86.5 offered, up from 76 bid, 78 offered on Thursday and, he noted, well up from the 40-42 level where they were trading "just the other day."

Another trader saw the '08s at 95 bid, 96 offered, which he called up 3 points on the day, although he said they finished below their day's highs at 97.5 bid, 98.5 offered. He saw the '16s up 8 points on the session at 84 bid, 86 offered, after having been as high as 89 bid, 91 offered.

Another market source saw Countrywide's bonds among the most actively traded on the day, with the 61/4s advancing almost 7 points to 85.5 level, although at one point earlier in the session, those bonds had gotten as good as 94, before coming down from that peak. The 31/4s were meantime just below 95 - actually off slightly on the session, and well down from their early peak level just a shade below par. Countrywide's 5.80% notes due 2012 were seen going home at about 90.5, up more than 5 points on the day, though they finished well below their early zenith around 97.

While Countrywide's bonds continued to rise, defying the old financial market maxim of "buy the rumor, sell the news," its New York Stock Exchange-traded shares - which had jumped 51.4% in Thursday's hectic, rumor- and news report-driven trading - did exactly that, nosediving $1.42, or 18.32%, on Friday to end at $6.33, on volume of 234 million shares, nearly five times the usual turnover.

UPS bonds trade up

Outside of the financial sphere, a trader said that the new UPS bonds "performed quite well." He saw the five-year notes, which had priced Thursday at 145 bps over, tightening to 134 bps bid, 130 bps offered. Its 10-year notes narrowed from 150 bps at the pricing to 157 bps bid, 154 bps offered, while the 30-year issue came in 10 bps to 170 bps bid, 167 bps offered, from 180 bps at the pricing.

The trader saw more modest gains in Canadian Natural Resources' new issue, also a mega-deal that priced on Thursday. While the five-year piece tightened a bit to 195 bps over from 200 bps at the pricing, the 10-year notes were about unchanged at 205 bps bid, 202 bps offered, versus a 205 bps spread at the pricing. The 32-year long bond narrowed a little to 228 bps bid, 221 bps offered from an issue spread of 230 bps.

And the trader saw the new Emerson Electric 5¼% 10-year notes only slightly changed at 144 bps bid, 140 bps offered, versus 145 bps when the issue priced on Thursday.

© 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.