BAA Funding prices; TCF plans preferreds amid euro zone woes; spreads 'tighter in general'

By Aleesia Forni and Andrea Heisinger

New York, June 18 - Corporate bond issuers mostly shied away from the high-grade primary on Monday following a mix of good news out of elections in Greece and a hike in borrowings costs in Spain.

A new $500 million deal of three-year notes was sold via Rule 144A and Regulation S by BAA Funding Ltd.

TCF Financial Corp. kept the flow of deals going in the preferred stock market with the announcement and pricing of a $150 million sale of perpetual shares.

At the end of the previous week, sources were hesitant to make any predictions for the week ahead of elections in Greece on Sunday.

The pro-bailout party came out ahead in the elections, with a government said to be forming on Tuesday. This news provided a quick bounce to the market at the open on Monday, followed by a fall throughout the day as worries about Spain and other countries resumed amid heightened borrowing costs.

"[The market] was down most of the day mostly on Spain fears," a syndicate source said. "Then it moved and traced back some of its losses."

A two-day Federal Reserve Federal Open Market Committee meeting begins on Tuesday, but may not entirely scare issuers away.

"I think we'll have a couple that will look [tomorrow]," a source said. "I don't see why not."

One source remarked that the Federal Reserve meetings may result in muted sessions in both the new issue and secondary markets on Tuesday and Wednesday.

There was also a report out Monday from Standard & Poor's stating that new issuance picked up slightly in May relative to April, with most of the improvement in investment-grade issuance. A total of 75 new investment-grade deals worth $55 billion came to market during the month, according to S&P, compared with only 45 deals worth about $29 billion in April.

The Markit CDX Series 18 North American Investment Grade index tightened 1 bps on Monday at a spread of 119 bps.

In the secondary market, spreads were "tighter in general" on Monday, a source said late in New York's session.

BAA prices short bond

BAA Funding sold $500 million of 2.5% three-year senior secured notes in a private sale, a market source said.

The notes (/A-/A-) were priced at a spread of Treasuries plus 215 bps.

The deal was done under Rule 144A and Regulation S.

BBVA Securities Inc., HSBC Securities (USA) Inc., Morgan Stanley & Co. LLC and RBS Securities Inc. were bookrunners.

BAA Funding was last in the market with a $1 billion offering of 10-year notes on June 22, 2011.

The holding company for airport operator BAA Airports is based in London.

TCF's preferreds

TCF Financial priced an upsized $150 million of 7.5% series A noncumulative perpetual preferred stock, according to an FWP with the Securities and Exchange Commission. The size of the trade was increased from $100 million.

Price talk for the $25-par paper was in the 7.75% area, a trader said early in the day.

There is a $22.5 million overallotment option. The preferreds (BB+/BB-) will be issued as depositary shares representing a 1/1,000th interest in each share.

TCF will apply to list the new preferred issue on the New York Stock Exchange under the ticker symbol "TCBPB."

Morgan Stanley & Co. Inc. and UBS Securities LLC were bookrunners.

Proceeds will be used to redeem the company's $115 million of 10.75% series I junior subordinated notes.

TCF is a Wayzata, Minn.-based bank holding company for TCF National Bank.

Goldman Sachs firms

In the secondary market, Goldman Sachs' bond due 2018 tightened 4 bps to 421 bps bid on Monday, a market source said.

The bank priced $1.5 billion 6.15% 10-year bonds in April 2008 at Treasuries plus 237.5 bps.

Bank of America widens

Also in the secondary, Bank of America's 7.375% five-year notes widened 4 bps from Friday's close to 296 bps bid.

The bank priced $3 billion notes due 2014 at Treasuries plus 537.5 bps on May 8, 2009.

Stephanie N. Rotondo contributed to this review

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