Bank of America, Citi, NAB bring primary back to life; Kroger, Citi deals meet strong demand

By Aleesia Forni and Andrea Heisinger

New York, July 18 - Bank of America Corp., Citigroup Inc., Kroger Co. and National Australia Bank Ltd. blazed into the investment-grade bond market Thursday.

Bank of America sold $2 billion of 10-year notes after posting positive second-quarter earnings before Wednesday's market open.

The bank had net income of $4 billion for Q2, up substantially from $2.5 billion a year ago.

A $2.5 billion sale of three-year notes in two parts came from Citigroup. There was a $1 billion floating-rate tranche and $1.5 billion of fixed-rate notes. Both were sold more than 10 basis points tighter than initial guidance.

And National Australia Bank tapped the market for $2.6 billion of bonds in three tranches, sold through its New York branch.

Grocery store retailer Kroger brought a $1 billion trade of senior notes in two parts. The sale included $600 million of 10-year notes and $400 million of 30-year bonds.

Bank Nederlandse Gemeenten NV brought a $400 million reopening of floating-rate notes due July 18, 2016. Total issuance will be $1 billion.

Another reopening came from Finland's Kuntarahoitus OYJ. The government-owned credit institution tapped its floaters due Oct. 9, 2015 to add $150 million.

Nearly $15 billion of bonds have been priced so far this week, thanks to the handful of large offerings from banks coming out of earnings blackout.

"It was just timing," a source said of why the largest deals came to the market so late in the week. "You had yesterday as a no-go, and the beginning [of the week] was a little soft."

The source also added that "everything performed really well today."

High-grade bond spreads were trading tighter in the secondary market on Thursday, one market source said, as new issues are continuing to meet strong demand.

Following this trend, the new notes from Citigroup and Kroger were quoted better near the end of the day's trading.

Citigroup's fixed-rate notes were quoted 2 bps better late Thursday, while Kroger's two-part deal traded 4 bps to 7 bps better.

Meanwhile, the Markit CDX North American Investment Grade index was 1 bp tighter at a spread of 75 bps early during the session.

In the preferred stock space, a trader said Wells Fargo & Co.'s new $1.5 billion issue of 5.85% series Q class A fixed-to-floating rate noncumulative preferreds had been greenshoed, adding another $225 million, or 9 million shares, to the total issuance.

He saw the paper rising up to $25.30 bid, $25.35 offered.

Another market source said the issue was again topping the day's most active list and gaining 9 cents in the process to close at $25.28.

The deal came Monday, ending a weeks-long drought in the new issue market. The securities freed to trade on Tuesday and have been on the rise ever since.

Citi's short bond

Citigroup sold $2.5 billion of three-year notes (Baa2/A-/) in two tranches, an informed source said.

There was $1.5 billion of 1.7% three-year notes sold at a spread of Treasuries plus 112 bps.

A trader quoted the notes 2 bps tighter at 110 bps bid, 107 bps offered near the end of the session. Initial price talk was in the Treasuries plus 125 bps area and later revised to the 115 bps area.

A $1 billion tranche of three-year floating-rate notes priced at par to yield 96 bps over Treasuries.

The floaters had initial guidance at an equivalent spread over Libor to the fixed-rate notes, the source said.

The bookrunner was Citigroup Global Markets Inc.

New York-based financial services company Citigroup was last in the U.S. bond market with a $1.25 billion offering of 10-year notes on May 7. Citi last brought a three-year maturity in a $1.5 billion, two-tranche sale on March 22 that included a 1.3% fixed-rate note sold at 96 bps over Treasuries.

Bank of America prices tight

Bank of America sold $2 billion of 4.1% 10-year notes (Baa2/A-/A) at a spread of Treasuries plus 157 bps, a source away from the trade said.

The sale was done tight to talk in the 160 bps area.

BofA Merrill Lynch was the bookrunner.

Bank of America, a financial services company based in Charlotte, N.C., last tapped the U.S. bond market in a $4 billion offering in four tranches on March 19. That sale included a reopening of 3.3% notes due 2023 priced at 147 bps over Treasuries.

Kroger sells $1 billion

Kroger tapped the market for $1 billion of senior notes (Baa2/BBB/BBB) in two tranches, a source close to the trade said.

A $600 million tranche of 3.85% 10-year notes sold at a spread of Treasuries plus 132.5 bps. Initial talk was in the 137.5 bps area, plus or minus 5 bps.

A market source saw the notes trade at 128 bps bid, 126 bps offered.

The second part was $400 million of 5.15% 30-year bonds priced at 155 bps over Treasuries. Initial guidance was in the 160 bps area, plus or minus 5 bps.

The notes were quoted at 148 bps bid, 146 bps offered near the session's close.

BofA Merrill Lynch, U.S. Bancorp Investments Inc. and Wells Fargo Securities LLC were bookrunners.

Proceeds are being used to repay commercial paper issued to fund repayment of long-term debt that matured in February and April and for general corporate purposes.

The Cincinnati-based grocery retailer was last in the U.S. bond market with an $850 million offering of notes in two parts on April 10, 2012. That sale included a 3.4% 10-year note priced at 150 bps over Treasuries and a 5% 30-year bond sold at Treasuries plus 190 bps.

NAB's three tranches

National Australia Bank, through its New York branch, sold $2.6 billion of senior notes (Aa2/AA-/) in three tranches, a market source said.

The sale had $1.35 billion of three-year floating-rate notes priced at par to yield Libor plus 55 bps.

There was also $500 million of 1.3% three-year notes sold at a spread of Treasuries plus 72 bps.

Finally, there was a $750 million tranche of 2.3% five-year notes priced at 98 bps over Treasuries.

BofA Merrill Lynch, Citigroup, Morgan Stanley & Co. LLC and National Australia Bank were on the books.

Proceeds will be used for general purposes by the branch, including loans to other offices or entities within National Australia Bank.

The Melbourne, Australia-based financial services company was last in the U.S. bond market with a three-tranche offering on Jan. 14.

BNG's reopening

Bank Nederlandse Gemeenten NV reopened its issue of floating-rate notes (Aaa/AAA/AAA) due July 18, 2016 to add $400 million, a market source said Thursday.

Pricing was at par to yield Libor plus 17 bps.

Total issuance will be $1 billion, including $600 million priced on July 10.

The sale was done under Rule 144A and Regulation S.

Citigroup and TD Securities (USA) LLC were bookrunners.

The local government funding agency is based in the Hague, the Netherlands.

Kuntarahoitus' floater

Kuntarahoitus reopened its issue of floating-rate notes due Oct. 9, 2015 to add $150 million, a market source said.

The coupon was Libor plus 7 bps with a price of 100.004 to yield Libor plus 10 bps.

Total issuance will be $950 million including $800 million previously sold.

Bookrunners were Citigroup and Deutsche Bank Securities Inc.

The Finnish-government-owned credit institution is based in Helsinki.

Stephanie N. Rotondo contributed to this review.

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