Zions Bancorp, Korea Development Bank price bonds; Citigroup, Bank of America securities tighten

By Andrea Heisinger

New York, Jan. 16 - The week ended much quieter than it began in the investment-grade bond market as syndicate desks shut down early before a long weekend.

New deals were priced from Zions Bancorp, which marketed an offering of notes backed by the Federal Deposit Insurance Corp. overnight, a market source said, and also from Korea Development Bank.

An offering of notes from American Water Capital Corp. was also announced in a Securities and Exchange Commission filing.

Recent deals from Wal-Mart Stores Inc. and Emerson Electric Co. remained tighter in the secondary market a day after pricing. Financials Citigroup and Bank of America Corp. tightened sharply despite negative-sounding headlines.

Zions sells FDIC notes

Zions Bancorp became one of the first regional banks to price an issue of FDIC-backed notes on Friday.

The deal priced early after holding out overnight, a market source said.

The $254.9 million issue of floating-rate notes due 2012 priced at par to yield three-month Libor plus 37 basis points, the source said.

Barclays Capital Inc. was the bookrunner.

Korea bank prices $2 billion

Korea Development Bank priced $2 billion of 8% five-year notes Friday at 99.145 to yield Treasuries plus 675 bps.

Bookrunners were BNP Paribas Securities Corp., Deutsche Bank Securities Inc., HSBC Securities, Merrill Lynch, Pierce, Fenner & Smith Inc. and RBS Greenwich Capital.

American Water plans offering

American Water Capital announced a $75 million offering of senior monthly notes due 2038 in an SEC filing Friday. The notes are callable after five years, with proceeds to be used to fund repayment of short-term debt.

Edward Jones is running the books.

Goldman gives reopening terms

Goldman Sachs Group Inc. announced terms Friday for a second reopening of FDIC-backed floaters due 2010 that originally priced at the beginning of December. The terms were given in an SEC filing.

The notes were reopened to add $950 million of floaters priced at 100.8409 plus accrued interest. The have a coupon of three-month Libor plus 50 bps.

This brings total issuance to $1.725 billion. The reopened notes priced Wednesday.

Goldman Sachs & Co. ran the books.

Toyota terms emerge

Toyota Motor Credit Corp. announced terms for an issue of floating-rate notes in an SEC filing Friday.

The $140 million of medium-term floaters due 2009 priced at par to yield three-month Libor plus 80 bps. The notes priced Thursday.

Agents were Barclays Capital and Citigroup Global Markets Inc.

Financials become focus

The focus shifted back to financial names Friday, a syndicate source said, after it had been on industrial names for the past couple of weeks.

The change was due to news overnight from Bank of America, which received an infusion of capital from the government and also posted a quarterly loss.

Citigroup also was in the spotlight again when it announced earnings, which were bad but actually better than expected, a source said. The firm posted a fourth-quarter loss of $8.29 billion.

"The whole Bank of America [news] overnight was the focus today," a market source said.

Although the tone was somewhat difficult to judge because of a shortage of new issues, he said everything was "tighter on low volume" by early afternoon.

Bank of America posted a fourth-quarter loss of $1.79 billion after a midnight deal from federal regulators gave the company $20 billion in capital. The government is also set to absorb about $98 billion in bad assets from the company.

B of A has been asking for help since its acquisition of Merrill Lynch was finalized, leaving it with the investment bank's quarterly losses on top of its own.

Citigroup has yet to receive more government aid but is being pressured to further split itself. Earlier in the week the bank agreed to merge its brokerage unit with Morgan Stanley.

The news from financial names dominated headlines and talk from market sources.

One said "financials were really taking it on the chin today."

The coming week is largely uncertain with a long weekend and Tuesday's inauguration. Sources were unsure what effect that would have on the market, if any.

Issuance could start back up Tuesday provided market conditions are favorable.

As for Friday, by about noon, business was largely done for the day.

"Everyone's kind of shutting down for the weekend," a syndicate source said.

Wal-Mart bonds in

The two-tranche issue from Wal-Mart Stores that priced Thursday was seen tightening nicely by early Friday afternoon.

The 3% notes due 2014 were in 20 bps to 35 bps from the Treasuries plus 175 bps pricing. They were seen at 155 bps bid, 140 bps offered, a trader said.

The 4.125% bonds due 2019 priced at Treasuries plus 200 bps and were seen in modestly to 190 bps bid, 185 bps offered.

Emerson seen tighter

The new Emerson Electric 4.875% bonds due 2019 were seen at 255 bps bid, 245 bps offered from Thursday's price of 270 bps, a trader said.

Campbell Soup holds gains

The Campbell Soup Co. 4.5% bonds due 2019 that priced Wednesday remained tighter Friday from pricing at Treasuries plus 237.5 bps.

They were seen in 30 bps to 35 bps, a trader said, to 217 bps bid, 212 bps offered.

Pepsi Bottling 20 bps tighter

Pepsi's Bottling Group LLC bonds that priced Wednesday remained moderately tighter Friday, a source said.

The 5.125% bonds due 2019 were at 280 bps bid, with no offer, from pricing at Treasuries plus 300 bps.

Citi, B of A bonds tighten

After being mostly wider for much of the week, Citigroup and Bank of America bonds shifted the other way Friday, a trader said, calling them "substantially tighter" by early afternoon.

The companies' outstanding bonds were seen 30 bps to 50 bps tighter from Thursday's levels, he said.

Staples tops volume

The new 9.75% bonds due 2014 from Staples Inc. were seen as the top bond of the day in terms of volume.

Bank of America's 1.7% FDIC-backed bonds due 2010 were seen behind Staples as the second highest in terms of trading volume for the day.

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