Westpac NZ sells bonds, BB&T offers trust preferreds, deals dry up; new deals trade strongly

By Andrea Heisinger and Paul Deckelman

New York, July 21 - New deals mostly dried up Tuesday, with Westpac Securities NZ Ltd. offering bonds with little competition. BB&T Capital Trust VI sold trust preferred securities as well, in a deal that had been expected to go overnight but ended up pricing the same day.

Many deals for the week came out on Monday, a source said, reducing the calendar for the next couple of days. The tone had not changed much from the previous day, a market source said, adding that it was weaker.

Among the established issues in the secondary arena on Tuesday, a market source said the CDX Series 12 North American high-grade index narrowed by 2 basis point to a mid bid-asked spread level of 123 bps.

Advancing issues - which had regained their lead over decliners on Monday - continued to dominate on Tuesday, by a nearly two-to-one margin.

Overall market activity, reflected in dollar-volume totals, rose 43% from Monday's pace.

Spreads in general were seen wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year government note came in about 12 bps on Tuesday to 3.49%.

The new deals which had priced on Monday, for such names as Wal-Mart Stores Inc., TJX Cos. Inc., Bemis Co., Inc. and Plains All-American Pipeline, LP/PAA Finance Corp. - were seen continuing to firm on Tuesday, building on the initial aftermarket gains.

BB&T sells trust preferreds

BB&T Capital Trust sold $500 million, or 20 million, of 9.6% enhanced trust preferred securities late Tuesday at par of $25, a source close to the deal said.

The preferreds have an initial maturity of Aug. 1, 2064, with a final maturity on Aug. 1, 2069. The maturity will automatically be extended if the securities are not redeemed by the 2064 maturity.

There is an overallotment option of $75 million, or 3 million securities.

Proceeds will be used to purchase junior subordinated debentures, the proceeds of which will be used for general corporate purposes.

The sale was intended to go overnight, as most preferred issues do, but the source close to the sale said it "came together so quickly it made sense to price now." It was announced early Tuesday in a 424B3 filing with the Securities and Exchange Commission, and priced at about 4 p.m. ET, the source said.

Bookrunners were Banc of America/Merrill Lynch, Morgan Stanley & Co., BB&T Capital Markets, UBS Investment Bank and Wells Fargo Securities.

The issuing unit of financial services company BB&T Corp. is based in Winston-Salem, N.C.

Westpac unit offers five-years

Westpac Securities NZ priced $1 billion of 3.45% five-year notes Tuesday with the guarantee of the government of New Zealand, an informed source said.

The notes are priced at a spread of Treasuries plus 116.8 bps.

The deal was done via Rule 144A.

Goldman Sachs & Co. and J.P. Morgan Securities ran the books.

The subsidiary of Westpac Banking Corp. is based in Sydney, Australia.

The deal was done quietly, a source away from it said.

"Those deals kind of slip in and out of the market on the quiet," he said. "It wasn't even on our radar. You don't see much of them."

Slow day surprises some

Tuesday did not seem to feed off the momentum from Monday's primary market activity and was mostly quiet.

One market source said, when asked why deals dried up, "I'm not sure, really. We saw a lot yesterday."

"Honestly, we had nothing lined up for today," a syndicate source said. "Things looked good, though."

Other desks have things in the pipeline for the remainder of the week, as the source said his does, but they likely won't amount to much and will come out in the second half of the week.

"It's possible they were planned for Wednesday or Thursday after an earnings announcement," a source said. "We're still dealing with [earnings] blackouts, so it's not entirely surprising it's quiet."

The market hadn't changed much from Monday, a source said, adding that it "felt a little weaker, but not enough to stop issuance."

Some desks say, tone permitting, that they have deals left on the calendar for the coming two days at least.

"We still have stuff in the pipeline," a source said. "Nothing solid on what day, but it's something."

Wal-Mart, TJX trade tighter

In the secondary, a trader said that Wal-Mart's 6.20% bonds due 2038 - which had priced at a spread over comparable Treasuries of 130 bps on Monday, were trading on Tuesday at 119 bps bid, 115 bps offered.

The Bentonville, Ark.-based retailer's $500 million issue - an add-on to its original $1.5 billion of the bonds - had tightened to 123 bps bid, 118 bps offered in its initial aftermarket dealings on Monday.

A market source at another desk saw very heavy trading in the Wal-Mart bonds, estimating turnover on the day at over $150 million.

Fellow retailer TJX's 4.20% notes due 2015 firmed to a bid spread of 152 bps over, in from 159 bps bid, 156 bps offered in initial aftermarket dealings on Monday.

The Framingham, Mass-based store-chain operator had priced its $400 million offering - upsized from the originally planned $250 million - on Monday at 170 bps over.

Bemis gets better

The trader saw Bemis Cos.' 5.65% notes due 2014 at 265 bps bid, 255 bps offered.

The Neenah, Wis.-based flexible packaging maker's $400 million of bonds had priced at 325 bps over on Monday and then had firmed smartly to 285 bps bid, 280 bps offered.

The trader did not see any levels for the other half of that deal - Bemis' $400 million of 6.80% notes due 2019, which also priced on Monday at 325 bps over.

Plains Pipeline powers up

Plains All American Pipeline's new 4.25% notes due 2012 continued to come in during Tuesday's session. A market source saw those $500 million of notes - upsized from the originally planned $320 million -- having firmed to 240 bps bid, 230 bps offered.

The Houston-based natural gas pipeline operator had priced the bonds Monday at 275 bps over, and they had tightened in initial aftermarket dealings to 260 bps bid, 250 bps offered.

Financial names seen mixed

Among the bonds for financial companies, Citigroup's 5.30% notes due 2012 were one of the larger upside movers, tightening by over 50 bps to end just under the 400 bps mark.

However, JP Morgan Chase & Co.'s 5.15% notes due 2015 widened out nearly 30 bps to the 160 bps over mark, while Bank of America's 4.875% notes due 2012 were at 300 bps over, some 20 bps wider on the day.

Bank, brokerage CDS widen out

A trader who watches the credit-default swaps market said that the cost of protecting a holder of big-bank bonds against a possible event of default was 1 bps to 10 bps wider, while brokerage company CDS costs were 5 bps to 10 bps wider on the session.

© 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.