NuStar sells notes; SoCal Edison, Realty Income hit preferreds; Citi, Bank of America firm

By Andrea Heisinger and Cristal Cody

New York, Jan. 30 - Investment-grade bond issuance got off to a tepid start for the week with NuStar Logistics, LP testing the waters.

The unit of petroleum company NuStar Energy LP priced $250 million of 10-year paper.

There also was a reopening of preferred stock by Southern California Edison Co. to add $100 million of fixed-to-floating rate preference stock to an outstanding issue.

There also was a new deal announced in the preferred stock market from Realty Income Corp. The shares are expected to price Tuesday.

There wasn't much new negativity hitting the primary to start the week, but supply was expected to be sparse as companies continue to announce fourth-quarter and 2011 earnings. There is $10 billion or less of notes expected to price in the high-grade market for the week.

"It was pretty quiet, other than a couple of preferreds," one source said.

Tuesday is set to be a little livelier with at least a handful of new deals.

"I know of a couple of things," a syndicate source said, adding "nothing massive." There's one trade that could be $1 billion and another possible $250 million deal on tap.

"It's not too exciting, but something's better than nothing, right?" the syndicate source said.

The Markit CDX Series 17 North American investment-grade index eased 3 basis points to a spread of 103 bps.

One source said the day had "two stories going on out there. The CDS spreads are widening out a bit, but if you look at new issues, they're trading decently."

Overall trading volume stayed flat at about $12 billion.

"More liquid financial names are doing OK today," a trader said.

Citigroup Inc.'s 3.625% three-year note deal is now 35 bps tighter than where it debuted, a trader said.

Bank of America Corp.'s notes due 2022 also are trading more than 30 bps tighter since they priced earlier in January.

Europe concerns kept Treasuries better on the day. The 10-year Treasury note yield fell 5 bps to 1.84%. The yield on the 30-year bond dropped 6 bps to 3.00%.

NuStar guaranteed deal

NuStar Logistics sold $250 million of 4.75% 10-year senior notes (Baa3/BBB-/BBB-) to yield 295 bps over Treasuries, a source close to the trade said.

The trade priced wider than initial talk of 287.5 bps, a source said, and in line with revised guidance of 295 bps area, plus or minus 5 bps.

Price guidance was partly based on outstanding Sonoco Products Co. bonds, the source said.

Sonoco is in the same sector, although that company is slightly better rated at Baa2/BBB+/.

Sonoco Products last priced 10-year debt with a 4.375% coupon and spread of 225 bps on Oct. 20, 2011.

There was about $375 million on the books.

Bookrunners were Citigroup Global Markets Inc., Mizuho Securities USA Inc. and RBS Securities Inc.

The proceeds are being used for general corporate purposes, including repayment of borrowings under a revolving credit facility.

The debt is guaranteed by NuStar Energy LP and NuStar Pipeline Operating Partnership LP.

The company provides storage of petroleum and is based in San Antonio, Texas.

SoCal Edison preferred add-on

Southern California Edison, an Edison International company, offered $100 million of $1,000-par fixed-to-floating series E preference stock (Baa2/BBB-/BBB+), according to a filing with the Securities and Exchange Commission.

The notes are a reopening of a previously issued security. There was $250 million, or 250,000 shares, of the stock outstanding as of Jan. 17, according to an FWP filed with the SEC on Monday.

The preference shares will be sold at 99.739% of face value plus accrued dividends from Jan. 17.

The interest rate is set at 6.25% through Feb. 1, 2022. At that time, the rate will convert to Libor plus a 4.199% spread and will be payable quarterly as declared by the board.

J.P. Morgan Securities LLC is the bookrunner.

The proceeds will be used to either repay commercial paper borrowings or for general corporate purposes.

The energy company is based in Rosemead, Calif.

Realty Income preps shares

Realty Income announced plans to sell monthly income class F cumulative redeemable preferred stock.

The $25-par stock was said to be "going fine" in the gray market, according to a trader. He gave price talk of 6.625% to 6.75%.

Shortly before the close, the trader quoted the issue at less 20 bid, less 15 offered.

Another trader said the paper was experiencing strong demand.

"The deal's in good shape," he said. "It should upsize."

He pegged the preferreds around $24.85.

The proceeds will be used by the Escondido, Calif.-based real estate investment trust to pay accrued and unpaid dividends on the company's class D preferreds, as well as to redeem said issue.

Remaining funds will be used to repay borrowings under the company's $425 million acquisition credit facility.

Citigroup firms

Financial names traded better on Monday, including Citigroup's 3.625% notes due Dec. 9, 2014.

The notes were quoted going out at 270 bps bid, a trader said.

Citigroup sold $500 million of the 3.625% notes (A3/A-/A+) on Dec. 2 at a spread of Treasuries plus 323.9 basis points.

The financial services company is based in New York City.

Bank of America better

Bank of America's 5.7% senior notes due 2022 traded tighter at 345 bps bid. The notes have come in more than 30 bps in the secondary market since they priced earlier in the month.

The 5.7% 10-year notes (Baa1/A/A-) were sold in a $1.5 billion offering on Jan. 19 at a spread of Treasuries plus 378 basis points.

The financial services company is based in Charlotte, N.C.

Stephanie N. Rotondo contributed to this review

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