PNC Financial unit, HSBC Finance price as week starts flat, Deutsche Bank preferreds announced

By Andrea Heisinger and Paul Deckelman

Omaha, Feb. 11 - Issues from a branch of PNC Financial Services and HSBC Finance Corp. started what is predicted to be a quiet week.

In the investment-grade secondary market Monday, declining issues led advancers by about a 61/2-to-five ratio, while overall market activity, reflected in dollar volumes, rose about 8% from Friday's levels.

PNC Bank's new hybrid securities were seen initially firmer, although by the end of the day they were not too far off their par issue level.

With overall heaviness in the market, particularly in the financial sector due to the troubles of insurance giant American International Group Inc., bank names like Citigroup, Bank of America and Bear Stearns' cash bonds were heavier, as were their credit-default swap spreads.

Debt protection costs also were seen having widened out on monoline bond insurers like MBIA Inc. and Ambac Financial Group Inc. in the wake of the sobering news out of AIG.

PNC sells $375 million

PNC Preferred Funding Trust III priced $375 million of 9.7% perpetual hybrid preferred securities, a source close to the deal said.

The Rule 144A securities priced at par and are non-callable for five years.

Goldman Sachs & Co. was bookrunner.

HSBC Finance priced $110.997 million of 5.6% 10-year senior notes, according to a 424B3 Securities and Exchange Commission filing.

They are non-callable.

Banc of America Securities LLC, HSBC Securities and Incapital, LLC ran the books.

Deutsche plans trust preferreds

An upcoming issue was announced by Deutsche Bank, through its subsidiary Deutsche Bank Contingent Capital Trust III.

It will issue trust preferred securities priced at $25 each, according to a 424B2 Securities and Exchange Commission filing. The securities will be non-callable.

The issue will price Wednesday at the earliest, an informed source said.

Bookrunners are Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Inc. and Wachovia Capital Securities LLC.

Petrobras announces, then pulls

Brazil's Petrobras announced a $500 million reopening of its 6.125% global notes due 2016, but then pulled it.

Price talk had been widened to 220 basis points from 210.

There wasn't a high volume of issuance expected Monday, but sources said some negative news, such as that from AIG may have caused issuers to think twice.

"There's just very little to talk about," a source said early in the day. "The equity market opened all right, so who knows. Maybe the AIG news scared people away."

Another source said the tone was OK, but there's not a huge calendar of issues waiting to come into the market after a high-volume January.

"It wasn't a great week last week so that may have something to do with it," he said.

"I think people are just taking a breather."

It's unclear, other than the Deutsche Bank issue, what may be coming down the pipe the rest of the week.

One source said it rests on the stability of the market.

"We'll have to see if things are stable at the open tomorrow," he said. "We could see some more come in, but who knows."

New PNC issue bounces around

A trader saw the new PNC 8.70% hybrid preferred securities trade up as high as 102 bid from their par issue price earlier in the session before coming off that peak level. He said the securities were left in a par-102 context.

Elsewhere, he said that there was "probably quite a lot of trading in the [bank] go-go paper," although he said he had not seen "a lot." He characterized that sector as "a touch weaker."

A market source at another desk pegged Citigroup's 4 7/8% notes due 2015 as having widened by about 15 basis points to the 175 bps level, pretty much identically with the movement in Bank of America's 5.30% notes due 2017. Bear Stearns' 4.55% notes due 2010 was seen 20 bps wider, at about the 325 bps mark.

AIG angst in financial sector

One of the financial markets' major stories on the day Monday was insurance giant AIG's disclosure of larger-than-originally announced losses related to the subprime lending industry meltdown and the resulting credit crunch, which threw a pall over the financial sector.

AIG - the biggest U.S. insurer - said in a Securities and Exchange Commission filing Monday that its portfolio of risky contracts that it owns probably lost a lot more value than it previously thought. It now places that 2007 loss in its derivatives holdings at almost $6 billion - almost four times its original estimate of $1.6 billion, made just two months ago.

"When the AIG news came out," the trader said, "they were a little weaker. They started the day in nicely [from Friday's levels], got a little weaker with the AIG news and ended up a tad tighter - not as tight as they started the day, but a tad tighter, off their lows at the end of the day."

However, at another desk, a trader saw the credit-default swaps contracts of both MBIA and Ambac widen out - Ambac by about 20 bps and MBIA by about 50 bps on the day, with the latter's debt-protection cost finishing at 435 bps bid, 455 bps offered.

He also saw major bank and brokerage CDS spreads widen by anywhere from 5 bps to 10 bps, pretty much across the board.

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