Bank of America prices large FDIC-backed deal, tone positive before holidays; recent issues tighten

By Andrea Heisinger

New York, Dec. 19 - Bank of America Corp. priced another large offering of notes backed by the Federal Deposit Insurance Corp. on Friday.

Such government-backed notes from banking and financial institutions are expected to be issued until Christmas and will likely resume as the market reopens afterward, a source said.

"They really don't seem to be slowing down at all," he said.

The secondary market capped a busy week with a quiet day of trading. With few new issues to speak of, traders continued to watch the financial names issuing under the FDIC's Temporary Liquidity Guarantee Program and also corporate deals. The latter continued to tighten as the market remained strong.

B of A does three tranches

Bank of America priced $6.75 billion of FDIC-backed notes in three tranches Friday, market sources said.

The $3.75 billion of notes due Dec. 23, 2010 priced at par to yield 1.7%, or Treasuries plus 97 basis points.

The other two tranches were of floating-rate notes.

A $500 million tranche of floaters due December 2010 priced at par to yield three-month Libor plus 18 bps.

A $2.5 billion tranche of floaters due June 2012 priced at par to yield three-month Libor plus 38 bps.

Banc of America Securities LLC ran the books.

Toyota adds to notes

Toyota Motor Credit Corp. added $30 million Thursday to a previous pricing of one-year floaters done at a coupon of three-month Libor plus 100 bps.

The add-on priced at 99.99996. The total issuance is $140 million, including $110 million priced on Dec. 17.

Banc of America Securities was agent for the add-on.

Busy week ends

It seemed the new issues wouldn't stop coming as conditions remained favorable for new issues.

On Thursday, sources said they were continuing to play catch up from all of the deals earlier in the week.

"It's really all of these FDIC deals that are making us busy," a source said. "Everything else is pretty small."

Many of the week's corporate issues have paled in size compared to the sometimes multi-billion-dollar deals from financial names that have priced FDIC-backed offerings.

Friday was dominated by the large deal from Bank of America, while earlier in the week JPMorgan Chase and Morgan Stanley also did somewhat large note placements.

It's predicted the pace will continue for the foreseeable future, or until the cap is reached for the issuance under the government guarantee.

Conditions remained ripe Friday for corporate issuance, although it's unclear how many will be able to take advantage of this tone before the Christmas and New Year holidays.

"I think there might be a few out there [that] want to come in, but we'll see," a source said. "This auto stuff helped a little, but next week's kind of getting down to the wire."

A bailout plan with loans for the auto companies was announced Friday, although it seemed to have little effect on the investment-grade market as the auto names are all junk rated.

Safeway in sharply

Safeway Inc.'s recent issue of 6.25% bonds due 2014 remained significantly tighter late Friday after pricing earlier in the week at 512.5 bps.

The notes were about 50 bps to 60 bps better, at 460 bps bid, 450 bps offered, a trader said.

Disney bonds in 30 bps

Walt Disney Co.'s recent issue of 4.5% bonds due 2014 was seen more than 30 bps tighter late Friday, a trader said.

The notes were at 303 bps bid, 298 bps offered, he said, from the pricing level of 337.5 bps.

Energy companies move

Energy Transfer Partners LP and Enbridge Energy Partners LP were each seen moving in secondary trading Friday afternoon, a trader said.

Both issues priced at a coupon and not a spread, so were seen trading at a dollar price.

The Energy Transfer 9.7% notes due 2019 were at 100.25 bid, 101.625 offered from pricing at 99.928.

Enbridge Energy's 9.875% notes due 2019 were at 101 bid, 101.5 offered from pricing at 99.94.

New bonds priced Thursday from tobacco company Altria Group Inc. were not seen quoted in trading, the secondary source said.

Financials heavy in trading

Financial names were again seen dominating trading volume early Friday afternoon as they continue to receive a boost from the FDIC-backed issues.

Seen highest in volume was JPMorgan Chase & Co.'s 2.625% notes due 2010.

Right behind those notes was an issue of floaters due 2010 from General Electric Capital Corp.

Bank of America and John Deere Capital Corp. also had FDIC-backed note issues seen trading at high volume.

Trading ends on quiet note

Secondary trading slowed a bit by late Friday afternoon, with a trader saying, "It's pretty quiet around here."

The week was busy through Thursday as corporate bonds improved in the secondary. Nearly all of the non-FDIC bonds that were issued were seen at least slightly tighter in trading, or in some cases 50 bps or more two days after pricing.

AT&T, Barclays day's big movers

AT&T Corp. was seen as one of the day's biggest movers, with its 5.1% notes due 2014 tightening more than 50 bps to 310 bps over Treasuries.

The company recently launched its high-speed internet service for small businesses.

On the other end was Barclays Bank, with its 5.45% notes due 2012 seen widening more than 45 bps to 332 bps.

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