Dr. Pepper Snapple, Regions Financial price to end record week; financial names contribute big numbers

By Andrea Heisinger and Paul Deckelman

Omaha, April 25 - New issues from Dr. Pepper Snapple Group, Inc. and Regions Financing Trust III closed out a record week of investment grade offerings.

Issuance for the week was around $40 billion, with one source saying Tuesday was the largest day of issuance on record at around $17 billion.

Much of the week's total was from financial names, most of which were coming out of blackout after earnings announcements.

"My calculations revealed about 82% of the total was self-led capital issues," a market source said. "They needed new provisions to bolster their balance sheet and took advantage of a strong secondary market."

Friday's issues only provided a small amount of the week's total.

Dr. Pepper sells at tight end

Dr. Pepper priced $1.7 billion in three tranches.

The $250 million of 6.12% five-year notes priced at 99.987 to yield 6.123% with a spread of Treasuries plus 295 basis points. They priced at the tight end of talk of 295 to 300 bps, a market source said.

The $1.2 billion of 6.82% 10-year notes priced at 99.985 to yield 6.822% with a spread of Treasuries plus 295 bps. This was also at the tight end of price talk of 295 to 300 bps.

The $250 million of 7.45% 30-year notes priced at 99.976 to yield 7.452% with a spread of Treasuries plus 287.5 bps. This was at the tight end of talk of 287.5 to 300 bps.

The issue priced via Rule 144A.

Banc of America Securities LLC, J.P. Morgan Securities Inc. and Morgan Stanley & Co. Inc. were bookrunners.

Regions sells trust preferreds

Regions Financial priced its issue that was announced Wednesday.

The $300 million, or 12 million securities, of 8.875% trust preferred securities priced at par of $25.

The securities have a scheduled maturity of June 15, 2048, with final repayment in 2078.

They also carry an overallotment option of $45 million, or 1.8 million securities, to be used within 30 days.

Morgan Stanley, Citigroup, Merrill Lynch, Pierce, Fenner & Smith Inc. and Morgan Keegan & Co. were bookrunners.

The week's issuers were not only heavy on the financial names, but also on the multi-billion dollar side.

Issuers that came in over the $1 billion mark included Citigroup Inc., KfW, Merrill Lynch & Co. Inc., JPMorgan Chase & Co., Goldman Sachs Group, UBS AG, Wachovia Corp., Xerox Corp., Morgan Stanley, Export Development Canada, Bank of America Corp. and Allstate Life Global Funding.

Smaller issuers included 9 Dragons Paper Ltd., Great River Energy, Swire Pacific Ltd., Fifth Third Bancorp, Textron Financial Corp., Natixis and Canadian National Railway Co.

The week largely remained on an even keel, with few market fluctuations causing issuers to take pause.

"It was mostly unchanged throughout the week," a market source said. "It was a flat week. This wasn't necessarily a bad thing for the market. People got things done."

'Healthy backlog'

The coming week is not expected to top the record levels, sources said, with a more modest volume expected.

"There's a healthy backlog, but we're not likely to see a large number of non-financial issuers," market source said, adding that "we're about 60% of the way there in earnings season."

Monday will likely bring a couple of deals, but most issuers will wait to see what tone is like before coming to the market Tuesday, a source said.

Secondary trading for the week was quiet, and saw most issues tightening after pricing.

"It was a touch tighter on the week in general," a source said. "We saw recent new issues about five to 15 bps tighter."

In the investment-grade secondary market Friday, advancing issues trailed decliners by almost a seven-to-six ratio, while overall market activity, reflected in dollar volumes, fell by about 22% from Thursday's pace.

Spreads in general continued to narrowed as Treasury yields kept rising, with the yield on the benchmark 10-year issue, for instance, widening out by 5 bps to 3.87%.

Dr. Pepper Snapple's new bonds were very well received when they broke into the secondary sphere, trading up smartly.

Lots of pop for Dr. Pepper

A trader said that the new Dr. Pepper Snapple bonds "tightened like all hell. They did very well."

He saw the 6.82% notes due 2018, which had priced at a spread over comparable Treasury issues of 295 bps, had tightened to 270 bps bid, 265 bps offered.

He also saw the new 7.45% notes due 2038, which had come at a 287.5 bps spread, tighten to 262 bps bid, 258 bps offered.

"Twenty-five basis points [of tightening] on the long end - that will make your month," he added.

Apart from the Dr. Pepper issue, he said that Friday was "a relatively subdued day." Among the issues which had priced earlier in the week, Xerox's new bonds "continue to tighten in, with everything else."

The copier king's 5.65% notes due 2013, which had priced on Wednesday at 267 bps over, and were trading at 255 bps bid, 250 bps offered on Friday. He said that issue was more active than the 6.35% bonds due 2018, which had priced at the same time

In the new Canadian National Railway bonds that priced on Thursday, "I didn't really see anything in the five years."

The 10-years came at 278 bps over and had narrowed to 267 bps bid, 262 bps offered.

All told, he said that spreads generally had tightened by 10 bps on the week, and by 20 bps to 30 bps over the last two weeks.

Elsewhere, a trader said that things were quiet on the credit-default swaps front, with debt-protection costs for major banks tighter by 2 bps to 7 bps, and major-brokerage CDS costs 2 bps to 4 bps tighter.

MBIA better

Also among the financial names, a trader saw MBIA Inc.'s 14% surplus notes due 2033 - nominally investment-grade rated but trading around in the junk market - move up 2 points to 92 bid, 94 offered.

The bonds had fallen from the mid-90s to lows as bad as 88 bid earlier in the week on the large quarterly loss reported by MBIA's main rival in the bond-insurance field, Ambac Financial Group Inc. However, after hitting that trough at mid-week, they gradually moved back to somewhat firmer levels.

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