Goldman, Regions add to financial supply; Microsoft prices; new, recent deals trade weaker

By Aleesia Forni and Andrea Heisinger

New York, April 25 - Bonds from the financial sector kept coming Thursday as Goldman Sachs Group Inc. and Regions Financial Corp. joined Microsoft Corp. in the high-grade market.

There was a $1.95 billion trade of notes in three maturities from Microsoft. The Redmond, Wash.-based company priced notes due 2018, 2023 and 2043 after also selling a euro-denominated bond.

Goldman Sachs priced $1.25 billion of five-year floating-rate notes.

Alabama-based Regions Financial sold $750 million of five-year bonds in a split-rated offering. Terms were not available at press time.

Two market sources said that Microsoft perhaps jumped into the market ahead of Apple Inc., which announced on its first-quarter earnings call Tuesday that it would sell debt.

"Maybe they were seeing what they could do," one syndicate source said. "They got some low rates, that's for sure."

The five-year note from Microsoft was said to have priced at the lowest spread ever for that maturity, the source said, but that could not be confirmed at press time.

The Markit CDX North American Investment Grade index was 3 basis points tighter at a spread of 79 bps.

The strong tone to the investment-grade bond market continued on Thursday, one trader said, adding that there were "better buyers across the board."

The new 30-year bonds from Microsoft traded 4 bps weaker near the end of the session, one market source said, though the source had not seen markets for the five-year notes or the 10-year bonds.

Wednesday's new issues from Cox Communications Inc. and Citigroup Inc. were trading wider during Thursday's session.

Both of Cox's new bonds traded 5 bps wider on the day, while Citigroup's notes were quoted 4 bps wider.

Preferreds active

The preferred stock primary market remained busy Thursday, and it was expected to stay that way for the near future.

"From what I know, it's going to stay busy for a while," a trader said, adding that the next week's calendar was going to be "fully loaded." He noted that the market could see a deal from U.S. Bancorp.

"They've got a 7.875% [series D noncumulative perpetual preferred] that just became callable," he said. He was surprised the issue hadn't been called already but speculated that perhaps the bank wanted to bring a new deal first.

However, the trader also said he did not expect to see any new issues coming on Friday.

As for Thursday's new deals, W.R. Berkley Corp. said it was planning a sale of at least $150 million of $25-par subordinated debentures due 2053.

Price talk was around 5.75%. The issue ending up coming at 5.625%, with $350 million shares being sold.

Also announced Thursday was an offering of fixed-to-floating-rate noncumulative preference shares from Aspen Insurance Holdings Ltd. That issue priced at 5.95%, with $275 million shares getting sold.

From Wednesday business, BB&T Corp.'s $450 million of 5.2% series G noncumulative perpetual preferreds freed up in early afternoon trading, according to a market source.

Microsoft's big deal

Microsoft tapped the market for $1.95 billion of senior notes (Aaa/AAA/) in three tranches, a market source said.

There was $450 million of 1% five-year notes priced at Treasuries plus 32 bps. Initial guidance was in the Treasuries plus 35 bps to 40 bps range and later revised to the 35 bps area, plus or minus 3 bps.

A $1 billion tranche of 2.375% 10-year notes sold at 70 bps over Treasuries. Whispered talk was in the range of 70 bps to 75 bps, and it was later revised to 70 bps to 73 bps.

Finally, there was $500 million of 3.75% 30-year bonds priced at a spread of Treasuries plus 90 bps. Price guidance was initially in the 90 bps to 95 bps range and later tightened to 90 bps to 93 bps.

The notes were quoted 4 bps wider at 94 bps bid, 87 bps offered near Thursday's close.

BofA Merrill Lynch and RBS Securities Inc. were the active bookrunners. Passives were Barclays, Citigroup Global Markets Inc., HSBC Securities (USA) Inc. and Wells Fargo Securities LLC.

Proceeds are being used for general corporate purposes.

Microsoft last sold bonds in the U.S. market in a $2.25 billion offering on Nov. 2. That trade included a 0.875% five-year note priced at 27 bps over Treasuries, a 2.125% 10-year note priced at 47 bps over Treasuries and a 3.5% 30-year bond sold at Treasuries plus 67 bps.

The software, services and hardware developer and marketer is based in Redmond, Wash.

Goldman brings floaters

Goldman Sachs was in the market with a $1.25 billion sale of five-year floating-rate notes (A3/A-/A-) priced at par to yield Libor plus 120 bps, a source away from the trade said.

Goldman Sachs & Co. was the bookrunner.

The financial services company is based in New York.

UniCredit terms

UniCredit SpA sold $750 million of 6.375% 10-year tier 2 subordinated bonds (Baa3/BBB/BBB) at par to yield 6.375%, a market source said.

The sale was announced Tuesday with initial price guidance in the 6.625% area, which was later revised to the 6.5% area.

The bonds were priced Wednesday after the books stayed open overnight to take advantage of Asian and European investor interest, the market source said.

Pricing was done under Regulation S at a spread of mid-swaps plus 551 basis points. The bonds are non-callable for five years.

The bookrunners were BNP Paribas Securities Corp., Citigroup and UniCredit.

The banking and financial services company is based in Rome and Milan, Italy.

W.R. Berkley's $25-par notes

W.R. Berkley priced a $350 million offering of 5.625% $25-par subordinated debentures due April 30, 2053 on Thursday.

"They are keeping it pretty tight to the vest," a trader said, seeing a $24.81 bid in the gray market at midday. He said the issue had traded up to $24.85 at one point.

After the close, a market source quoted the issue at $24.92 bid, $24.97 offered.

"I thought it would end up a little better," the source said.

Proceeds will be used to repay all or part of the $250 million of 6.75% subordinated debentures due 2045 currently held by W.R. Berkley Capital Trust II and for general corporate purposes. W.R. Capital Trust II will then use the funds to call all or part of its 6.75% trust originated preferred securities.

W.R. Berkley is a Greenwich, Conn.-based insurance holding company.

Aspen's new deal

Another insurance company, Aspen Insurance Holdings, brought a deal Thursday as well.

The Hamilton, Bermuda-based company sold $275 million of 5.95% fixed-to-floating-rate noncumulative preference shares.

A market source said initial price talk was around 6.25%.

"That's being held pretty tight as well," a trader said. "There's not much going out."

He saw a par bid for the paper, "so it's hot, hot."

"They had a lot more demand," a source said. "But they really didn't grow the size all that much."

He saw the issue at $25.30 bid post-pricing.

Proceeds will be used to settle the cash portion of the mandatory conversion of the company's 5.625% perpetual PIERS and any remaining funds for general corporate purposes.

Cox weakens

Cox's $1 billion tranche of 2.95% 10-year notes was quoted 5 bps wider at 130 bps bid, 127 bps offered during Thursday's session.

The notes priced at a spread of Treasuries plus 130 bps on Wednesday.

The $500 million of 4.5% 30-year bonds, which were sold at 160 bps over Treasuries, traded 5 bps wider from levels seen late Wednesday at 162 bps bid, 159 bps offered.

The provider of phone, internet and TV service is based in Atlanta.

Citigroup notes widen

In other secondary action, Citigroup's $1.35 billion sale of 1.75% five-year notes traded 4 bps wider from levels seen on Wednesday at 109 bps bid, 106 bps offered.

The notes were priced at Treasuries plus 108 bps.

The financial services company is based in New York.

Stephanie N. Rotondo contributed to this review

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