GS Caltex prices; Zions Bancorp, ANZ plan upcoming issues

By Andrea Heisinger and Paul Deckelman

Omaha, June 25 - Companies held off on pricing investment-grade bond issues pending an announcement from the Federal Reserve Open Market Committee meeting Wednesday, with most settling for announcing upcoming issues.

The news from the Fed was that the key Federal Funds rate would remain unchanged, as had been expected by market sources and futures.

This marked the first time the Fed has not cut rates since last September, when it began doing so out of fears of a flagging economy.

"Really it was pretty quiet after the announcement," a source said.

In the investment-grade secondary market Wednesday, advancing issues trailed decliners by a relatively narrow margin, while overall market activity, reflected in dollar volumes, rose by 9% from Tuesday's pace.

Spreads in general were seen little changed, as Treasury yields were relatively steady; the yield on the benchmark 10-year note, for instance, rose by 2 basis points to 4.10%.

Market activity was generally constrained ahead of the Wednesday afternoon release of the Federal Reserve's communique following the end of its regular policy meeting; as expected, the central bank left rates unchanged, bringing to an end a nearly year-long campaign of rate reductions. Also as expected the Fed sounded a hawkish note about the need for vigilance on inflation.

GS Caltex at wide end

One company that did issue Wednesday was South Korea's GS Caltex, which priced $300 million 7.25% five-year senior notes at 99.133 with a spread of Treasuries plus 390 bps.

It priced under Rule 144A and Regulation S.

The notes priced at the wide end of price talk of 375 to 390 bps.

Barclays Capital Inc., Goldman Sachs & Co., Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Inc. ran the books.

Zions to sell online

Among the upcoming issues announced was one from Zions Bancorporation.

The holding company for Zions Bank will price up to $150 million, or 6 million shares, of 9.5% non-cumulative perpetual preferred stock.

The preferreds will be priced at $25 and non-callable for five years.

As the company has done in the past, the preferreds will be sold in an online auction ending June 30.

Zions Direct, Inc. is acting as bookrunner.

ANZ to launch notes

Australia's ANZ bank starts a two-day roadshow Thursday for an upcoming issue of five-year senior notes, a market source said.

No other details have been set, but the issue is expected to price next week, he said.

Verizon Communications Inc. registered to sell up to $10 billion in debt, including preferred stock and debt securities, in a shelf filing with the Securities and Exchange Commission.

No timing was given for the securities offering or offerings, which can also includes common stock.

Deals expected Thursday

The one-day lull Wednesday is expected to end at least temporarily, with some companies pricing issues Thursday, a source said.

After the Fed's announcement, one or two issues are expected to price that were likely put on hold.

"It's definitely possible we'll see some issuance tomorrow," a source said. "After that, I think we'll be done for the week."

Most issuance got out of the way at the top of the week to avoid having to postpone due to a possible Fed rate change announcement, he said.

Recent bonds trade actively

One of the more active issues during the session was Johnson & Johnson's 5.15% notes due 2018, seen in about 1 bp on the session at 92, continuing to firm from the 103 bps spread over comparable Treasuries at which the New Brunswick, N.J.-based medical and consumer products company priced $900 million of the bonds on June 18 as part of a two-tranche offering.

The other J&J bond from that deal, the 5.85% paper due 2038, traded at 116 bps over, out from the 113 bps at which the company priced $700 million on June 18. The 5.85s traded on considerably less volume than did the 5.15s; according to a market source, nearly $100 million of the 5.15% bonds had traded hands by mid-afternoon - about twice the volume seen in the next nearest bond, Time Warner Cable Inc.'s 7.30% notes due 2038.

That latter bond, meantime, was being quoted at a spread of 268 bps over, well out from the 255 bps at which the New York-based cable-television giant had priced $1.5 billion of the bonds on June 16 as part of a three-tranche offering.

Time Warner Cable's 6.75% notes due 2018 on the other hand, were trading at 244 bps over, in from the 250 bps spread at which the company priced $2 billion of the bonds in that June 16 session.

And its 6.20% notes due 2013, $1.5 billion of which had priced at 250 bps over as well, were being quoted by another market source having tightened about 20 bps from recent levels to the 235 bps mark.

Financials seen mixed

In the important financials sector, a market source saw Credit Suisse's 5.50% notes due 2011 having tightened 15 bps on the session to the 165 bps level, while Morgan Stanley's 4.75% notes due 2014 were seen having come in by 10 bps to the 250 bps mark.

On the downside, CIT Corp.'s battered 5.80% notes due 2011 widened out by 20 bps to the 925 bps area.

CDS unchanged to slightly wider

A trader said that credit-default swap costs for major banks were pretty much unchanged from Tuesday's levels, except for the troubled thrift Washington Mutual, which was 15 bps wider at 570 bps bid, 580 bps offered.

He saw major brokerages' debt-protection costs about 5 bps wider "across the board."

Bond insurer MBIA Inc.'s 14% surplus notes due 2033 fell 1 point to 43 bid, 45 offered.

© 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.