Berkshire Hathaway prices; Aegon, Schwab sell preferred deals; Verizon flat on earnings news

By Andrea Heisinger and Cristal Cody

New York, Jan. 24 - Berkshire Hathaway Inc. tapped the high-grade bond market on Tuesday as other issuers stood down.

The holding company for several subsidiaries, including rail transportation and insurance names, priced $1.7 billion of paper in five- and-10-year tranches ahead of refinancing debt due in the coming month.

Meanwhile, Charles Schwab Corp. announced it had priced its $400 million, or 400,000 shares, of fixed-to-floating preferred stock. This issue was both announced and priced on Monday.

Aegon NV sold $500 million of 30-year $25-par subordinated notes in the preferred stock market.

There wasn't anything keeping issuers out of the market other than earnings blackout, but lack of supply also factored in.

"I mean, we weren't expecting it to be crazy busy this week," a syndicate source said.

Wednesday could see a couple of new deals, as well as an announcement from the Federal Reserve's Federal Open Market Committee meeting in the afternoon.

"We have maybe one that will look, but nothing definite," a source said.

The week was only expected to see between $5 billion and $10 billion of new deals for the high-grade bond market.

Berkshire Hathaway's two tranches traded tighter in the secondary market in what seemed to be a quiet session, sources said.

Bank paper was "basically unchanged on the day," a trader said.

Bonds generally seemed weaker and spread widened about 1 basis point to 3 bps.

"Not much going down," a trader said.

The Markit CDX Series 17 North American investment-grade index eased 1 bp to a spread of 104 bps.

Verizon Communications Inc.'s bonds "didn't change after the earning announcement," a trader said. The company on Tuesday reported a loss of $2.02 billion in the fourth quarter, compared with a profit of $2.64 billion in the same period a year ago.

"[Verizon's bonds] are 1 basis point wider on the day, but that's just with the market being a little bit weaker," the trader said.

Overall trading volume rose to nearly $15 billion on Tuesday from about $12 billion the previous day.

Treasuries edged lower ahead of the Federal Reserve's rate statement on Wednesday. The benchmark 10-year note yield was flat at 2.05%. The 30-year bond yield rose 2 bps to 3.15%.

Berkshire's two maturities

Berkshire Hathaway sold $1.7 billion of senior notes (Aa2/AA+/A+) in two tranches, an informed source said.

The $1.1 billion of 1.9% five-year notes priced at a spread of Treasuries plus 100 bps. The tranche was sold tighter than guidance in the 110 bps area.

A second tranche of $600 million of 3.4% 10-year paper sold at 137.5 bps over Treasuries. These notes priced in line with talk in the 137.5 bps area.

Bank of America Merrill Lynch and Goldman Sachs & Co. were bookrunners.

Proceeds are being used for general corporate purposes and debt refinancing.

Berkshire Hathaway's notes due 2017 traded 5 bps tighter at 95 bps bid, 92 bps offered in the secondary market, a trader said.

The tranche of notes due 2022 was quoted better at 134 bps bid, 130 bps offered.

The holding company for various subsidiaries is based in Omaha, Neb.

Schwab's preferreds price

Charles Schwab priced its offering of $400 million of 7% fixed-to-floating non-cumulative perpetual preferred stock, series A, late on Monday, according to an FWP with the Securities and Exchange Commission.

The shares (Baa2/BBB+/BB+) will have a fixed-rate coupon until Feb. 1, 2022 and a floating rate based on Libor plus 482 basis points after that day.

The cost per share is $1,000 to the public. The deal came in line with price talk.

Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC were the bookrunners.

Proceeds will be used for general corporate purposes, including supporting balance sheet growth and potential migration of client cash balances to bank deposits as 2012 progresses.

The investment and financial services company is based in San Francisco.

Aegon sells $25-par notes

The Netherlands' Aegon priced a $500 million issue of 8% 30-year $25-par non-cumulative subordinated notes (Baa1/BBB/BBB), a market source said.

The deal was originally expected to be about $250 million, but was increased to $500 million. Additionally, pricing came at the low end of talk.

Shortly before the market closed ­ and before the deal officially priced ­ a trader saw the notes at $24.65 bid, $24.70 offered.

After the bell, a trader placed the notes at $24.60.

"It's a very big deal," the second trader said. Still, he remarked that the deal was "kind of sloppy. It wasn't trading great."

He speculated that the lackluster performance was due to concerns about buying European securities. He also noted that most of the allotment went to retail buyers versus institutional buyers.

Bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC and Wells Fargo Securities LLC.

Proceeds are being used for general corporate purposes.

The life insurance, pension and investment products business trades on the New York Stock Exchange under "AEG" and is based in The Hague, the Netherlands. Aegon intends to list the new notes on the NYSE.

Sallie Mae deal

Education lender Sallie Mae priced $1.5 billion of split-rated notes (Ba1/BBB-/BBB-) in two tranches, an informed source said.

The deal included a $750 million tranche of 6% five-year notes, which priced to yield 6.25%, tight to the 6.25% to 6.375% price talk.

In addition, Sallie Mae priced a $750 million tranche of 7.25% 10-year notes to yield 7.5%, tight to the 7.5% to 7.625% price talk.

Bank of America Merrill Lynch, Barclays Capital Inc. and Deutsche Bank Securities Inc. were the joint bookrunners for the quick-to-market issue, which was priced on the investment grade desks, but which saw significant play among high yield investors, according to a trader from the crossover space.

The Newark, Del.-based company plans to use the proceeds for general corporate purposes.

Verizon flat on earnings

Verizon's 3.5% notes due 2021 edged 1 bp wider to 112 bps bid, 105 bps offered after the telecommunications company announced the fourth quarter loss, a trader said.

Verizon sold the notes in a $1.75 billion offering on Oct. 27 at a spread of 120 bps over Treasuries.

The broadband and telecommunications company is based in New York City.

Paul A. Harris and Stephanie N. Rotondo contributed to this review

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