US Bank, BB&T, Advance Auto sell bonds; NBC Universal plans deal; Goldman Sachs moves wider

By Andrea Heisinger and Cristal Cody

New York, April 26 - US Bank NA and BB&T Corp. were the only corporate entrants in the high-grade bond market on Monday with more to come.

An emerging markets deal was also priced by South Korea's Hana Bank.

Minneapolis-based US Bank sold $500 million of fixed- to floating-rate 10-year subordinated bank notes by early afternoon.

They were followed by BB&T, which priced $500 million of six-year notes.

Split-rated retailer Advance Auto Parts Inc. priced $300 million of 10-year split-rated notes at the tight end of guidance.

NBC Universal, Inc. announced a benchmark offering in three tranches, with pricing expected in the next day or two.

Also expected to price Tuesday is a sale from development bank Japan Finance Corp. The notes are guaranteed by the Japanese government.

The market started off the week with promise, a source said, and with deals from financials and companies coming off of earnings blackouts.

"It wasn't too bad," a source said. "It got a little better [throughout the day]."

Goldman Sachs Group Inc.'s notes dug a deeper hole in trading on Monday as the New York bank's high-grade debt moved out 7 basis points to 10 bps, according to sources.

Likewise, the cost of protecting holders of big-bank bonds, such as Bank of America, Citigroup and J.P. Morgan, against a possible event of default rose by 7 bps to 15 bps, indicating less investor confidence in the banking sector, a trader said.

Also in the secondary, BB&T's new six-year offering was seen 3 bps tighter in early trading.

Meanwhile, overall Trace volume was up 4% to about $9.9 billion, according to a market source.

Elsewhere, the CDX Series 14 North American high-grade index moved out 2 bps to a mid bid-asked spread level of 91 bps, according to a source.

"Market felt a little wider in general," one trader said.

In addition, Treasuries ended the day mixed after the Treasury sold $11 billion of five-year Treasury Inflation-Protected Securities, or TIPS.

The yield on the 10-year benchmark Treasury note was unchanged at 3.81%, while the yield on the 30-year Treasury bond eased 1 bp to 4.67%.

The Treasury Department plans to auction about $129 billion of notes and inflation-indexed debt this week, including $44 billion of two-year notes on Tuesday, $42 billion of five-year notes on Wednesday and $32 billion of seven-year notes on Thursday.

"It was a good auction, although it did pale a little bit," a source said. "I don't think there are fears of inflation, but we're probably seeing our peak of Treasury issuance this week."

Not to worry, though.

"The Treasury is still going to be issuing a lot of paper, no doubt about that. Our red ink is really, really high," the source said.

"But when the Treasury sent out its questionnaire to primary dealers last week about its refunding cycle, they specifically asked about reductions in the debt cycle - how they would recommend cutting coupon issuance going forward. So we're still going to see a lot of paper but probably not as much."

The Treasury sent the quarterly survey to dealers on Friday.

US Bank sells hybrid bank notes

US Bank sold $500 million of 3.778% 10-year fixed to floaters (Aa2/A+/A+) to yield 120 bps over Treasuries, an informed source said. This was in line with talk in the 120 bps area.

They have a fixed rate until April 29, 2015 and then a floating rate of three-month Libor plus 200.3 bps.

Bookrunners were Credit Suisse Securities, Morgan Stanley & Co. and US Bancorp Investments.

The deal comes a week after the Minneapolis-based financial services company announced first-quarter earnings of $648 million.

NBC plans deal in three tranches

NBC Universal is planning a benchmark sale of notes (Baa2/BBB+) in three tranches in "the next day or two," a source said.

The deal is expected to price on Tuesday, although there's a possibility of the sale not going until Wednesday.

It consists of notes due in 2015, 2020 and 2040.

They will be priced under Rule 144A.

The timing of the sale is meant to take advantage of "lower spreads" in the sector before they go any wider, the source said.

Goldman Sachs & Co., J.P. Morgan Securities and Morgan Stanley are bookrunners.

Proceeds are going to repay amounts under the company's existing two-year term loan agreement, with the remainder to a cash distribution to General Electric Co. upon the close of a pending joint venture transaction with Comcast Corp.

Comcast recently announced it would purchase the remaining 51% of shares in NBC Universal from General Electric.

The media and entertainment company is based in New York City.

Companies see opportunity

The investment-grade market was strong enough at the top of the week to see a small amount of deals price despite ongoing worries about Greece and other headlines.

"Nothing really changed" over the weekend, a source said. At least two of the day's sellers - BB&T and US Bank - took advantage of getting out of earning blackouts to sell small amounts of bonds.

The auto parts retailer Advance Auto was likely taking advantage of the market for a different reason. It was recently upgraded to investment grade by Standard & Poor's, but still has a high junk rating from Moody's.

One syndicate source said "there's more coming down the pipeline," with the bulk of deals expected on Tuesday and Wednesday if the market holds up.

So far, the only upcoming sales announced are from NBC Universal and Japan Finance.

BB&T prices $500 million

Financial services company BB&T sold $500 million of 3.95% six-year senior unsecured notes (A1/A/A+) to yield Treasuries plus 140 bps, a source close to the deal said.

Bookrunners were BB&T Capital Markets, Deutsche Bank Securities and UBS Investment Bank.

Proceeds are being used for general corporate purposes, including the acquisition of other companies, to repurchase shares of common stock, and for extending credit to, or funding investments of, subsidiaries.

The financial services company is based in Winston-Salem, N.C.

Advance Auto sells $300 million split-rated bonds

Advance Auto Parts sold $300 million of 5.75% split-rated 10-year senior unsecured notes (Ba1/BBB-) late in the day to yield Treasuries plus 200 bps, a market source said..

They were talked in the 212.5 bps area, with a margin of plus of minus 12.5 bps, a source said.

The company was raised from junk to split-rated after S&P upgraded it to BBB- from BB+.

The active bookrunner was J.P. Morgan Securities, with Bank of America Merrill Lynch passive.

Proceeds are being used to repay debt and for general corporate purposes.

The auto parts retailer is based in Roanoke, Va.

Japan Finance plans guaranteed notes

Japan Finance announced a sale of guaranteed bonds (Aaa/AAA), according to a 424B5 filing with the Securities and Exchange Commission.

It is expected to go overnight and price on Tuesday, a source said.

The deal is guaranteed by the government of Japan.

Barclays Capital, BNP Paribas Securities and Citigroup Global Markets are bookrunners.

The development bank is based in Tokyo.

Korea's Hana Bank sells five-years

Hana Bank priced $500 million of 4.5% five-year senior unsecured notes early in the day under Rule 144A, a source said.

The South Korean bank priced the notes at 197 bps over Treasuries. They were priced tighter than the original talk in the range of 205 to 215 bps.

Bank of America Merrill Lynch, Citigroup Global Markets, J.P. Morgan Securities and RBS Securities ran the books.

BB&T firms

BB&T priced $500 million of 3.95% senior unsecured notes due 2016 on Monday at Treasuries plus 140 bps.

The notes initially firmed in secondary trading, a trader said.

"Saw the bonds earlier at +137 [and] more recently at +140."

Goldman wider

Goldman Sachs' high-grade debt kept up its weaker stance on Monday, according to sources.

"GS continued to widen," a trader said.

The 5.375% notes due 2020 were seen 15 bps wider earlier in the day. The 10-year notes were quoted early on Friday 26 bps wider at 186 bps and seen early Monday at 191 bps over Treasuries, according to a source.

The 10-year notes ended the session "about 5 wider today," a trader said.

In addition, Goldman's shorter paper was quoted 7-10 bps weaker on Monday.

Banks and brokerage CDS costs rise

A trader who follows the credit default swaps market said that the cost of protecting holders of big-bank bonds, such as Bank of America, Citigroup and J.P. Morgan, against a possible event of default rose by 7 bps to 15 bps, showing signs of weakened confidence in the banking sector.

He said that the CDS costs for bonds issued by investment banking companies like Morgan Stanley and Goldman Sachs meantime rose between 7 bps and 16 bps.

Paul Deckelman contributed to this report.

© 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.