Alexandria sells; GECC offers hybrid; secondary spreads widen during 'very volatile' session

By Aleesia Forni and Andrea Heisinger

New York, May 29 - The pace of issuance slowed in the high-grade bond market Wednesday as Alexandria Real Estate Equities, Inc. and Kommunalbanken AS brought small trades.

The real estate investment trust sold $350 million of 10-year bonds.

Kommunalbanken reopened an issue of notes due 2015 to add $500 million. The total amount outstanding will be $2 billion, a source said.

Elsewhere, General Electric Capital Corp. was said to have priced $1 billion of $100,000-par perpetual fixed-to-floating-rate notes.

Yields on Treasury bonds - mostly 10-year and 30-year maturities - were up again Wednesday as they were Tuesday, a market source said.

"It was going to be a modest week anyway," the source said. "This [surge in yields] isn't helping."

A syndicate source also cited the summer slowdown for the quiet day.

"We have people still out," the syndicate source said. "We'll have more activity next week."

In secondary market action, a trader quoted Alexandria Real Estate's notes flat near the end of the day's trading.

A source at another desk quoted Tuesday's new issue from Pfizer Inc. trading 3 basis points to 5 bps weaker early during Wednesday's session.

The secondary market saw a "very volatile session [on Wednesday] with spreads wider across the board," the trader said.

The source added that spreads in the telecommunication and technology sector were generally 2 bps to 10 bps wider.

Investment-grade bank and brokerage credit default swap costs rose on Wednesday, according to a market source.

Bank of America Corp.'s CDS costs were 4 bps wider at 94 bps bid, 99 bps offered. Citigroup Inc.'s CDS costs rose 6 bps to 88 bps bid, 93 bps offered. JPMorgan Chase & Co.'s CDS costs were 1 bp wider at 78 bps bid, 83 bps offered. Wells Fargo & Co.'s CDS costs rose 2 bps to 65 bps bid, 69 bps offered.

Merrill Lynch's CDS costs rose 2 bps to 82 bps bid, 87 bps offered. Morgan Stanley's CDS costs were 3 bps wider at 123 bps bid, 128 bps offered. Goldman Sachs Group, Inc.'s CDS costs also rose 3 bps 112 bps bid, 117 bps offered.

Alexandria's 10-year

Alexandria Real Estate Equities tapped the market for an upsized $500 million of 3.9% 10-year senior notes (Baa2/BBB-/) priced at 180 bps over Treasuries, according to a market source and an FWP filing with the Securities and Exchange Commission.

The size was increased from $350 million, the source said.

A trader quoted the notes at 180 bps bid, 175 bps offered late during the session.

The bookrunners were J.P. Morgan Securities LLC, RBC Capital Markets LLC and RBS Securities Inc.

Proceeds are being used to prepay $150 million of a 2016 unsecured senior bank term loan and to reduce the balance of an unsecured senior line of credit to zero. The remainder will be held in cash and cash equivalents to fund near-term operations related to development and redevelopment projects, to fund near-term acquisitions and for general corporate purposes.

The notes are guaranteed by parent company Alexandria Real Estate Equities LP.

Alexandria was last in the U.S. bond market in February 2012 with a $550 million sale of 4.6% 10-year bonds priced at 260 bps over Treasuries.

The real estate investment trust for life science labs is based in Pasadena, Calif.

GE does hybrid

General Electric Capital was said to have priced a $1 billion offering of $100,000-par series C fixed-to-floating-rate noncumulative perpetual preferred stock, a market source said.

The terms of the sale were not available at press time.

Barclays, BofA Merrill Lynch, Citigroup Global Markets Inc., Goldman Sachs & Co., JPMorgan and Morgan Stanley & Co. LLC are the bookrunners.

When declared, dividends will initially be paid at a fixed rate on a semiannual basis. Beginning June 15, 2023, the dividend will float at Libor plus a spread.

The preferreds will not be listed on any exchange.

Proceeds will be used for general corporate purposes.

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

KBN's reopening

Kommunalbanken reopened its issue of 0.375% notes due April 10, 2015 to add $500 million, an informed source said.

Pricing was at 99.912 to yield 0.423% with a spread of mid-swaps minus 1 bp, or Treasuries plus 13 bps.

Total issuance will be $2 billion.

The bookrunners were BofA Merrill Lynch, Citigroup and Morgan Stanley.

Pricing was done under Rule 144A and Regulation S.

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

Pfizer notes weaker

Pfizer's $750 million of 0.9% notes due 2017 were quoted 5 bps weaker at 46 bps bid, 41 bps offered.

The notes were priced at Treasuries plus 45 bps.

The company's $1 billion of 1.5% five-year notes traded 3 bps wider at 51 bps bid, 48 bps offered, one trader said.

Pfizer sold the notes with a spread of Treasuries plus 50 bps.

The trader quoted the $1 billion tranche of 3% 10-year notes at 90 bps bid, 88 bps offered following Wednesday's sale at a spread of Treasuries plus 87.5 bps.

Finally, the $750 million of 4.3% 30-year bonds, which priced with a spread of 100 bps over Treasuries, traded 3 bps wider at 103 bps bid, 101 bps offered.

The sale also included $500 million of five-year floating-rate notes sold at par to yield Libor plus 30 bps.

Pfizer is a New York-based biopharmaceutical company.

Stephanie N. Rotondo contributed to this review

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