Bank of America, Natixis, Canadian National Rail, Allstate price; week winds down after high volume

By Andrea Heisinger and Paul Deckelman

Omaha, April 24 - It was another solid day for investment-grade issuers Thursday as Bank of America Corp., Natixis, Canadian National Railway and Allstate Life Global Funding took advantage of continued stability.

Bank of America was another in a string of financial names issuing this week after earnings announcements and blackout periods.

The company priced $4 billion of hybrid non-cumulative preferred stock at par.

The preferreds carry a fixed-rate of 8.125% until May 1, 2018, and then a floating rate of three-month Libor plus 364 basis points.

The stock is non-callable for 10 years.

Banc of America Securities LLC was bookrunner.

"They had to have had this completely sold," a market source said. "With such a large issue, they still probably only had 20 investors."

In the investment-grade secondary market Thursday, advancing issues trailed decliners by a three-to-two ratio, while overall market activity, reflected in dollar volumes, rose by about 3% from Wednesday's pace.

Spreads in general narrowed as Treasury yields rose, with the yield on the benchmark 10-year note, for instance, rising 9 bps to 3.82%.

Recently priced financial bonds were seen pretty much firmer across the board, reflecting a generally better tone in the sector. Among the gainers were new bonds from Merrill Lynch & Co.

New non-financial bonds from such issuers as Xerox Corp. and Textron Corp. were also on the upside.

Natixis upsizes

Back in the primary, French investment bank Natixis priced $750 million of perpetual hybrid securities, increased from $300 million.

The issue priced via Rule 144A/Regulation S.

It priced at par and carries a fixed rate of 10% until June 15, 2018, and then a floating rate of three-month Libor plus 651 bps.

They are non-callable for 10 years.

Price talk for the issue was the 10% area, a market source said.

Morgan Stanley & Co. Inc., Merrill Lynch, Pierce, Fenner & Smith Inc. and Natixis were bookrunners.

Allstate sells at tight end

Allstate priced $1.75 billion of 5.375% five-year notes at 99.9 to yield 5.39% with a spread of Treasuries plus 230 bps.

This was on the tight end of price talk of 230 to 235 bps, a market source said.

Merrill Lynch and Morgan Stanley were bookrunners.

Canadian National's two-parter

Canadian National Railway priced $650 million of notes in two tranches.

The $325 million of 5.75% notes due 2014 priced at 99.571 with a spread of Treasuries plus 193 bps.

They priced at the tight end of talk for a spread in the 195 bps area.

The $325 million of 5.55% 10-year notes priced at 99.564 with a spread of Treasuries plus 178 bps.

This tranche also priced at the tight end of talk for a spread in the 180 bps area.

Banc of America and Wachovia Capital Securities LLC were bookrunners.

Dr. Pepper plans deal

An issue was announced from the Dr. Pepper Snapple Group, Inc., but did not price, a source close to the deal said.

A market source said the issue was $1.7 billion in five, 10 and 30-year tranches.

It is a Rule 144A deal, with Banc of America, J.P. Morgan Securities Inc. and Morgan Stanley running the books.

Regions set for Friday

An issue of trust preferred securities from a funding subsidiary of Regions Financial Corp. is expected to price Friday, a source close to the deal said.

The issue was announced in a Securities and Exchange Commission filing Wednesday.

Morgan Stanley, Citigroup Global Markets Inc., Merrill Lynch and Morgan Keegan & Co. are bookrunners.

Sources asked about Thursday's tone all commented that things were quiet, with the day winding down from big issuance days earlier in the week.

"Everything's pretty much unchanged out there," a source said. "It was very quiet today."

Another source said things should be quiet Friday, with no large issues expected.

"It's just quiet out there," he said. "I think we're pretty well done for the week."

New financials seen firmer

A trader said that Merrill Lynch's new bonds "traded down in the first part of the day, in the morning, but then slowly started to trade up," and were firmer by the end of the day.

He saw the 6.875% notes due 2018, which had priced on Tuesday at a spread of 320 bps over comparable Treasury issues, first widening to as much as 322 bps, but then coming in to end at 312 bps over.

He saw Fifth Third Bancorp's new 6.25% senior notes due 2013, which had priced at 332 bps over on Wednesday, widen out to around a 340 bps spread. But by the end of the day, the bonds were bid at 328 bps over.

He said Wachovia Corp.'s new bonds weren't much traded, but did firm on the day.

Ambac impact fades, but still seen

Overall, he said the financial sector "was better across the board. It kind of led the way today," shaking off the investor angst seen earlier in the week on poor quarterly earnings from bond insurer Ambac Financial Group.

However, there were some lingering effects. A trader said that Ambac rival MBIA Insurance Corp.'s 14% surplus notes due 2033 - nominally investment-grade rated but trading around in the junk market - fell as low as 88 bid, 90 offered from Tuesday's levels at 92 bid, 94 offered, before coming off that low to end down 2 points at 90 bid, 92 offered, as the credit "continues to go down with Ambac."

The bonds were seen around a 96-97 context at the end of last week but tumbled after Ambac reported a huge quarterly loss, including $3 billion of charge-offs. Investor concerns about Ambac were also kept alive by New York State insurance chief Eric Dinallo's statement that the company might have to raise additional capital.

Xerox, Textron bonds better

Among the non-financial names, a trader saw Xerox's new 6.35% notes due 2018, which priced at a spread of 262 bps on Wednesday, ending at 255 bps bid, 2512 bps offered, "so it was in about 10 bps."

On the other hand, he saw the company's new 5.65% notes due 2013 at 270 bps bid, 267 bps offered, right around the 267 bps spread at which they had priced, "so clearly, the 6.35s are doing a little better."

He also saw Textron's new 5.40% notes due 2013 "in by 10" at 237 bps bid, 235 bps offered, versus the 245 bps spread at which the bonds had priced.

He saw no levels on the new Great River Energy 7.223% bonds due 2038, which priced at 275 bps over Treasuries on Wednesday.

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