Foreign issuers Telefonica, Kommunalbanken price amid earnings; trading 'weak' in secondary

By Aleesia Forni and Andrea Heisinger

New York, April 17 - The light load of new bond sales in the high-grade market continued on Wednesday as Spain's Telefonica Emisiones SAU and Kommunalbanken AS brought offerings.

Telefonica sold $2 billion of bonds due 2018 and 2023 that are backed by its parent company.

Norway's Kommunalbanken sold $300 million in a reopening of notes due 2018. The trade was done under Rule 144A and Regulation S.

Another large bank, Bank of America Corp., announced earnings before the day's stock market open. The Charlotte, N.C.-based bank missed analyst expectations when it reported earnings of 20 cents per share. Earnings were up from 3 cents per share the same period a year ago but missed the 23 cents per share mark that analysts had expected.

Those missed earnings may have been part of the reason the market was quiet other than some issuers based in other countries, but it's mostly because "we just don't have a lot of [corporate] supply right now," a market source said at the close.

"This week's been boring, but we're supposed to have a boring April."

In preferred stock trading, First Republic Bank's $175 million issue of 5.5% series D noncumulative preferreds freed to trade at midday Wednesday after pricing on Tuesday. A trader quoted the issue at $24.85 bid, par offered.

Also from Tuesday, JPMorgan Chase & Co.'s $1.5 billion offering of 5.15% $1,000-par series Q fixed-to-floating rate noncumulative preferreds were pegged by a trader at "101 locked."

The Markit CDX Series North American Investment Grade index was 2 basis points wider at a spread of 84 bps on Wednesday.

The investment-grade secondary market saw spreads widen on the session, market sources said.

"Weak trading today," one market source said, adding that spreads in the telecommunications and technology space were 3 bps to 5 bps wider on the day.

Hartford Financial Services Group Inc.'s recent deal was quoted 3 bps wider compared to levels seen earlier during Wednesday's trading.

Investment-grade bank and broker credit default swap costs were wider on the session, according to a market source.

Bank of America's CDS costs were 5 bps wider at 129 bps bid, 133 bps offered. Citigroup Inc.'s CDS costs rose 2 bps to 107 bps bid, 111 bps offered. JPMorgan Chase's CDS costs were 3 bps wider at 88 bps bid, 92 bps offered. Wells Fargo & Co.'s CDS costs widened 2 bps to 72 bps bid, 76 bps offered.

Merrill Lynch's CDS costs were 10 bps wider at 118 bps bid, 126 bps offered. Morgan Stanley's CDS costs rose 6 bps to 145 bps bid, 150 bps offered. Goldman Sachs Group, Inc.'s CDS costs widened 2 bps to 129 bps bid, 133 bps offered.

Telefonica's tranches

Telefonica Emisiones priced $2 billion of senior notes (Baa2/BBB/BBB+) in two tranches, an informed source said.

A $1.25 billion tranche of 3.192% five-year notes sold at a spread of Treasuries plus 250 bps.

There was also $750 million of 4.57%10-year bonds priced at 287.5 bps over Treasuries.

Initial price guidance early on Wednesday was in the Treasuries plus 200 bps to 300 bps range for both tranches, a source said.

The notes are guaranteed by Telefonica SA.

BNP Paribas Securities Corp., Goldman Sachs & Co. and HSBC Securities (USA) Inc. were the active bookrunners.

Proceeds will be deposited with Telefonica SA to be used for general corporate purposes.

The unit of the Madrid-based telecommunications group last priced bonds in the U.S. market in a $2.75 billion offering in two tranches on Feb. 7, 2011. That trade included a 3.992% five-year note sold at 173 bps over Treasuries and a 5.462% 10-year bond priced at Treasuries plus 183 bps.

KBN prices tap

Kommunalbanken was in the day's session with a $300 million reopening of floating-rate notes (Aaa/AAA/) due Feb. 20, 2018 priced at a coupon of Libor plus 18 bps, a market source said.

Pricing was at 99.958 to yield Libor plus 19 bps.

Total issuance will be $900 million including $600 million priced on Feb. 13.

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

The bookrunners were Citigroup Global Markets Inc., Goldman Sachs International and HSBC.

The government-funded lender to municipalities is based in Oslo.

Wells Fargo gives terms

Wells Fargo priced $2 billion of bonds (A2/A+/AA-) in two tranches, according to 424B2 filings with the Securities and Exchange Commission.

A $1.15 billion tranche of five-year medium-term floating-rate notes sold at par to yield Libor plus 63 bps

There was also a reopening of 1.5% notes due 2018 to add $850 million. The new bonds priced at 100.241 to yield 1.447% with a spread of Treasuries plus 75 bps.

Total issuance is $2.1 billion including $1.25 billion priced on Dec. 18 at Treasuries plus 78 bps.

The bookrunner was Wells Fargo Securities LLC.

The financial services company is based in San Francisco.

JPMorgan's hybrid

JPMorgan Chase priced $1.5 billion of 5.15% $1,000-par series Q fixed-to-floating-rate noncumulative perpetual preferred stock, a trader said.

J.P. Morgan Securities LLC was bookrunner.

When declared, dividends will be paid semiannually during the fixed-rate period. The floating rate, Libor plus 325 bps, will be paid on a quarterly basis beginning Aug. 1, 2023.

Proceeds will be used for general corporate purposes.

JPMorgan is a New York-based financial institution.

Hartford notes weaken

The secondary market saw Hartford Financial's notes weaken 3 bps on the day.

The 4.3% notes due 2043 were quoted at 145 bps bid, 142 bps offered.

Hartford sold the notes at a spread of Treasuries plus 145 bps on Monday.

Based in Hartford, Conn., Hartford Financial Services Group is a financial services holding company and parent company for Hartford Insurance Co.

Stephanie N. Rotondo contributed to this review

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