Scotiabank, Dr. Pepper Snapple, Sumitomo, Barclays among day's deals; bank paper widens

By Andrea Heisinger and Cristal Cody

New York, Jan. 6 - Dr Pepper Snapple Group Inc., Bank of Nova Scotia, Japan Finance Organization for Municipalities, Sumitomo Mitsui Financial Group and Barclays Bank plc kept the week's flow of new issuance in the investment-grade market going on Thursday.

Dr Pepper Snapple sold an upsized $500 million of five-year notes. The size was increased by $50 million.

A $1.5 billion sale from Japan's Sumitomo Mitsui Financial priced by mid-day after going overnight from Wednesday. The sale was in two tranches, and both priced in line with guidance.

There was a sovereign deal from the Japan Finance Organization for Municipalities. The lender to local government priced $1 billion of 10-year notes that are guaranteed by the Japanese government.

One of the last sales to price was from Barclays Bank. The financial sold $2 billion of notes in two tranches, each with maturities of three years.

Another late sale came from Bank of Nova Scotia. The Canadian financial priced two tranches, including a reopening of 2.375% notes due 2013. The second part of the deal was a tranche of 10-year notes.

Issuance is expected to drop off on Friday as the primary and secondary absorb all of the week's new bonds, a source said.

"We had a lot of new paper coming through and I think everyone wants to see how it does [in trading]," the source said.

The high-grade market has seen sizeable issuance in both corporate and sovereign deals for the first week of the year. The coming week could bring more large deals as companies and banks try to tap the market ahead of earnings and while conditions are OK, sources said.

There has been more than $43.341 billion of new issuance since the beginning of January, according to Prospect News data.

In secondary trading, the new five-year notes from Dr Pepper Snapple narrowed about 5 basis points, and Sumitomo Mitsui Financial's two tranches of notes also tightened, traders said.

Allegheny Technologies Inc.'s new senior notes opened up Thursday another 5 bps better in trading, a source said.

Bank and finance paper was weaker, including the new bonds from the Royal Bank of Scotland plc and General Electric Capital Corp., sources said.

The Markit CDX Series 14 North American investment-grade index was weaker by 4 basis points at a spread of 87 bps, Markit Group Ltd. said.

Overall investment-grade Trace volume was mostly unchanged on Thursday at about $17.8 billion, a source said.

Treasuries rallied on a rise in new unemployment claims. Initial jobless claims rose 18,000 to 409,000 in the previous week, the Labor Department said.

The Labor Department's December nonfarm payroll figures scheduled for release on Friday are expected to show a gain of 175,000 jobs.

The yield on the 10-year benchmark note fell 4 basis points to 3.4% on Thursday. The 30-year bond yield also moved lower by 3 bps to 4.51%.

Dr Pepper upsizes deal

Dr Pepper Snapple Group priced an upsized $500 million of 2.9% five-year senior notes (Baa2/BBB) to yield 85 bps over Treasuries, a syndicate source said.

The sale had initially been announced at $450 million.

Bank of America Merrill Lynch, J.P. Morgan Securities Inc. and UBS Securities LLC were bookrunners.

Proceeds will be used to replace a portion of cash used to purchase tendered 2018 notes.

The sale is guaranteed by domestic subsidiaries of the soft drink company based in Plano, Texas.

In the secondary market, Dr Pepper Snapple's new debt firmed about 5 bps to 81 bps bid, 80 bps offered, a source said.

Scotiabank's late sale

The Bank of Nova Scotia priced $1.25 billion of senior notes (Aa1/AA-) in two parts late in the day, including a reopening, a market source said.

The bank reopened its issue of 2.375% notes due 2013 to add $500 million. The notes priced at a spread of 60 bps over Treasuries.

Total issuance is $1.5 billion, including $1 billion priced on June 10, 2010 at 125 bps over Treasuries.

A second tranche was $750 million of 4.375% 10-year notes priced at 100 bps over Treasuries.

Bank of America Merrill Lynch, Barclays Capital Inc., Morgan Stanley & Co. Inc. and Scotia Capital USA Inc. were bookrunners.

Proceeds are being added to the bank's funds and used for general corporate purposes.

The financial services company is based in Halifax and Toronto.

Sumitomo's $1.5 billion

Japan's Sumitomo Mitsui Financial Group sold $1.5 billion of notes (Aa2/A+) with maturities of three and five years, a syndicate source said.

The $650 million tranche of 1.95% three-year notes priced at a spread of Treasuries plus 90 bps. This was in line with talk given late Wednesday in the 90 bps area.

A second tranche of $850 million of 3.1% five-year notes priced at 103 bps over Treasuries. This was at the tight end of guidance in the 105 bps area.

Citigroup Global Markets Inc., Barclays Capital Inc., Goldman Sachs & Co. International and J.P. Morgan Securities Inc. were bookrunners.

Proceeds are being used for general corporate purposes.

In secondary trading, the notes due 2014 firmed to 88 bps bid, 82 bps offered, a trader said.

The tranche of notes due 2016 was seen tighter at 98 bps bid, 95 bps offered.

The banking and financial company is based in Tokyo.

Barclays sells $2 billion

Barclays Bank priced $2 billion of senior notes (Aa3/AA-) in two tranches by late afternoon, according to a source away from the sale.

The $750 million tranche of three-year floating-rate notes priced at par to yield Libor plus 104 bps.

A second tranche of $1.25 billion of 2.375% three-year notes sold at a spread of Treasuries plus 135 bps.

Barclays Capital Inc. ran the books for the London-based financial services company.

Japan Finance notes

Japan Finance Organization for Municipalities priced $1 billion of 4% 10-year notes (Aa2/AA) at a spread of Treasuries plus 68.5 bps, according to an FWP filing with the Securities and Exchange Commission.

Bank of America Merrill Lynch, J.P. Morgan Securities Inc. and Nomura International plc were bookrunners.

Proceeds are being used to repay previously issued government-guaranteed bonds.

The sale is guaranteed by the government of Japan.

The lender to local governments is based in Tokyo.

Allegheny Technologies tighter

New paper from Allegheny Technologies, which sold $500 million of 5.95% 10-year senior notes (Baa3/BBB-) on Tuesday, has stayed strong in secondary trading, a source said.

Allegheny Technologies priced the notes at a spread of Treasuries plus 262.5 bps.

The notes firmed in trading to 240 bps bid, 237 bps offered on Wednesday and were seen opening up Thursday at 234 bps bid, 229 bps offered.

"It's around 5 better," the source said.

The specialty metals company is based in Pittsburgh.

Bank deals wider

Bank and finance paper was weaker a second day in trading, sources said.

The Royal Bank of Scotland's two tranches of debt sold on Tuesday traded 5 bps wider, a source said. RBS sold $2 billion of senior notes (Aa3/A+/AA-) in two tranches of 3.25% three-year notes at a spread of Treasuries plus 235 bps and 6.125% 10-year notes at 285 bps over Treasuries.

The financial services company is based in Edinburgh.

Also, General Electric Capital's new 4.625% 10-year notes (Aa2/AA+) opened Thursday 3 bps wider, a source said. The notes were sold on Tuesday at a spread of 135 bps over Treasuries.

The financial services arm of General Electric Co. is based in Norwalk, Conn.

Bank and finance paper was generally wider. Goldman Sachs Group, Inc.'s existing 6.15% notes due 2018 widened 5 bps to 117 bps over Treasuries, according to a source.

Bank of America Corp.'s 6.5% notes due 2016 widened to 236 bps from 224 bps, the source said.

Bank, brokerage CDS costs up

A trader who follows the credit-default swaps market said that the cost of protecting holders of big-bank paper against a possible event of default rose by between 5 basis points and 14 bps on Thursday, indicating lessened investor confidence in the sector. He said that Bank of America's CDS costs rose by the largest margin - 14 bps from Wednesday's levels - to 170 bps bid, 175 bps offered.

He said that the CDS costs for holders of bonds issued by large investment banking companies likewise ballooned out by between 7 bps and 17 bps, with BofA unit Merrill Lynch's costs up by 17 bps.

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.