BB&T, Scotiabank sell after raising dividends; corporates firm in thin trading; banks tighten

By Andrea Heisinger and Cristal Cody

New York, March 15 - Financial names dominated the investment-grade primary market for the second day in a row as BB&T Corp. and Bank of Nova Scotia priced bonds.

Both had announced an increase to their quarterly dividends before tapping the market. They followed in the footsteps of JPMorgan Chase & Co., which did the same on Wednesday.

BB&T priced $1.05 billion of paper with maturities in 2017 and 2022. The financial company passed the government's stress test, the results of which were released on Tuesday.

Scotiabank did its $2.75 billion sale in two parts due in three years and five years.

Germany's KfW reopened an issue of floating-rate notes due 2014 to add $750 million. The original issue priced in January.

The preferred stock market remained active and saw a deal announcement from Kilroy Realty Corp.

The number of new issues in the high-grade market slowed, although the sizes of Thursday's offerings were substantial.

"We were only expecting $15 [billion for the week], so I think we all were looking at a slowdown," one source said. "Nothing really to scare people away, just lack of supply."

Issuance was strong for the first three days of the week but had been expected to fall off after the influx of deals had saturated the market.

"Concessions still aren't great," a market source said, referring to the increase in new issue concessions in the past week or two. "A lot of this is [financials] coming in opportunistically."

Friday is expected to be quiet, although it's possible another bank or financial could tap the market.

"It seems like there's one every Friday, right?" the market source said.

Corporate bonds traded mostly tighter but on light volume over the day, sources said.

"Not a lot of trading going on," a trader said in the late afternoon. "It's not a super active market today."

The Markit CDX Series 17 North American Investment Grade index ended the day 1 basis point tighter at a spread of 90 bps.

"It's got a very firm tone to it," another trader said of the market. "Trading is actually pretty light though. Volume is on the light side."

Bank of Nova Scotia's new three- and five-year notes priced late in the day in the U.S. market and were not seen in afternoon trading.

"Seeing nothing in the new guys," a trader said.

BB&T's five-year notes traded wrapped around the issue price, a trader said. No trading was seen initially in the 10-year tranche by traders.

The bank and financial sector traded about 5 bps tighter on the day.

Charlotte, N.C.-based Bank of America Corp.'s 7.375% notes due 2014 (Baa1/A-) traded 14 bps better on the day to 301 bps, a source said.

Treasuries were mostly flat after Wednesday's sell-off. The benchmark 10-year note yield rose 1 bp to 2.28%. The 30-year bond yield added 1 bp on the day to close at 3.41%.

Scotiabank sells $2.75 billion

Bank of Nova Scotia sold $2.75 billion of covered bonds (Aaa/AAA/) in two tranches, a source close to the trade said.

The $1.25 billion of 1.05% three-year notes sold at a spread of Treasuries plus 52.6 bps.

There was $1.5 billion of 1.75% five-year notes priced at 69 bps over Treasuries.

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

The bookrunners were Bank of America Merrill Lynch, Barclays Capital Inc., Deutsche Bank Securities Inc., Scotia Capital (USA) Inc. and UBS Securities LLC.

Scotiabank was last in the market with a $2.5 billion issue of 1.95% five-year covered bonds priced at Treasuries plus 109.1 bps on Jan. 20.

The Canadian bank is based in Halifax, N.S.

BB&T sells in two parts

BB&T sold $1.05 billion of paper (A2/A-/A+) in two parts, an informed source said.

The $750 million of 2.15% five-year senior notes priced at a spread of Treasuries plus 110 bps.

A second tranche was $300 million of 3.95% 10-year subordinated notes sold at 175 bps over Treasuries.

Barclays, BB&T Capital Markets, Deutsche Bank and Goldman Sachs & Co. were the bookrunners.

Proceeds are being used for general corporate purposes.

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

KfW's reopening

KfW reopened an issue of floating-rate global notes due 2014 to add $750 million, a market source said.

The notes (Aaa/AAA/) were priced at 100.374 and have a coupon of Libor plus 18 bps.

Total issuance is $2 billion including $1.25 billion sold on Jan. 11 to yield Libor plus 18 bps.

Bank of America Merrill Lynch and BNP Paribas Securities Corp. were the bookrunners.

The government-owned development bank is based in Frankfurt.

Kilroy plans preferreds

Kilroy Realty intends to sell series G cumulative redeemable preferred stock, the company said in a filing with the Securities and Exchange Commission Thursday.

Price talk is 6.875% to 7%, according to a trader. He added that 3 million shares are currently expected to come, but "I'm sure they'll grow it," he said, seeing a $24.78 bid in the gray market shortly before the market closed.

Another market source quoted the issue at $24.75 bid, $24.85 offered.

"It's kind of not doing so well," he said. "Not horrendous, but not doing so well."

Wells Fargo Securities LLC, Bank of America Merrill Lynch, Barclays and J.P. Morgan Securities LLC are the bookrunners.

The preferreds become redeemable in 2017 or in the event of a change of control.

The company will apply to list the new preferreds on the New York Stock Exchange.

Proceeds will be used to redeem all of the company's 7.8% series E cumulative redeemable preferreds and for general corporate purposes, including the possible redemption of the 7.5% series F cumulative redeemable preferreds, acquiring properties and the repayment of outstanding debt.

Kilroy is a Los Angeles-based real estate investment trust.

Stephanie N. Rotondo contributed to this review

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