Bank of Montreal, Oneok, South Carolina Electric price; two preferred offerings announced

By Andrea Heisinger and Cristal Cody

New York, Jan. 23 - Bank of Montreal, Oneok, Inc. and South Carolina Electric & Gas Co. made their way to the high-grade debt market on Monday before a mid-week Federal Reserve meeting.

Bank of Montreal's $2 billion issue of five-year covered bonds was the largest deal of the day. The financial services company followed a similar $2.5 billion issue of five-year covered bonds by fellow Canadian Bank of Nova Scotia. BMO priced at the same coupon as Scotiabank but at a slightly better spread.

Oneok priced $700 million of 10-year debt in line with guidance, a source said.

Scana Corp. utility subsidiary South Carolina Electric & Gas sold $250 million of 30-year first mortgage bonds.

There were two deals announced by investment-grade companies in the preferred stock market.

The Netherlands' Aegon NV announced plans for a $250 million issue of $25-par 30-year subordinated notes. Pricing is expected on Tuesday.

Charles Schwab Corp. plans to price $400 million of 30-year fixed-to-floating-rate preferreds. The deal is also expected to price on Tuesday.

The market had a good feel to it at the open along with a modest amount of new deal announcements.

"I really thought there'd be more deals," a syndicate source said. The source added that it seemed busier than it was due to the two offerings announced in the preferred stock market.

"I really thought we'd be more busy, but I would think we'll have more later in the week."

Trading was light on Monday.

"Not a lot of volume," one trader said. "Things were better in general, but not a lot going on."

Overall trading volume was about $12 billion, compared with $14 billion on Friday.

Bonds did perform stronger over the day, with the Markit CDX Series 17 North American Investment Grade index in 3 basis points to a spread of 103 bps on Monday.

Telecom credits traded 4 bps to 5 bps tighter.

Bank and financial paper traded 5 bps to 15 bps better on the day, a trader said.

"Bank of America, Citi and Morgan Stanley are all 15 better," the trader said.

Bank of Montreal's new issue traded about 2 bps tighter in secondary trading, while its 2.5% senior notes due 2017 sold on Jan. 6 have come in 13 bps, traders said.

Bank of Nova Scotia's 1.95% five-year covered bonds sold on Friday traded about 4 bps tighter on Monday.

Investment-grade bank and brokerage credit default swaps costs traded lower on Monday, indicating more investor confidence in the financial sector. A trader saw bank paper CDS costs down between 4 bps to 15 bps. The trader said brokerage company paper CDS costs were down between 10 bps and 15 bps on the day.

In other secondary trading, South Carolina Electric's new 30-year bonds firmed about 2 bps.

Oneok's new issue traded about 2 bps wider on the bid side.

eBay Inc.'s bonds were seen unchanged on the day, though wider than issuance.

Treasuries finished lower on Monday, sending yields up 2 bps to 3 bps on the longer end of the curve. The benchmark 10-year note yield rose 3 bps to 2.05%. The 30-year bond yield climbed 3 bps to 3.13%.

BMO sells covered bonds

Bank of Montreal sold $2 billion of 1.95% five-year covered bonds (Aaa/AAA) to yield mid-swaps plus 76 bps, or Treasuries plus 108 bps, a market source said.

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

BMO Capital Markets Corp., Barclays Capital Inc., J.P. Morgan Securities LLC and HSBC Securities (USA) LLC were the bookrunners.

A trader saw the new bonds tighter at 106 bps bid, 104 bps offered.

Bank of Montreal's existing 2.5% senior notes due 2017 sold earlier this month traded on Monday at 157 bps bid, 152 bps offered before the new issue priced, another trader said.

The 2.5% notes priced on Jan. 6 in a $1.5 billion offering at a spread of 170 bps over Treasuries.

The financial services company is based in Toronto and Montreal.

Oneok's 10-year

Oneok priced $700 million of 4.25% 10-year senior notes (Baa2/BBB) to yield Treasuries plus 220 bps, an informed source said.

The debt was sold in line with guidance in the 220 bps area and also with whispered talk in the high 100 bps to 200 bps range, a source said.

There was a do-not-grow provision on the deal because the company "had no interest in doing more," the source said. There was about $1.4 billion on the books for the deal.

"We had to do some price discovery since they hadn't issued since 2005," the source said.

Bank of America Merrill Lynch, JPMorgan and Wells Fargo Securities LLC were the bookrunners.

Proceeds will be used to repay amounts under a $1.2 billion commercial paper program and for general corporate purposes, possibly including the purchase of common stock, the purchase of additional amounts of Oneok Partners shares and to pay dividends.

In trading, the notes edged wider to 222 bps bid, 217 bps offered, a trader said.

The diversified energy company is based in Tulsa, Okla.

SC Electric's long bonds

South Carolina Electric & Gas priced $250 million of 4.35% 30-year first mortgage bonds (A3/A/A) at a spread of 125 bps over Treasuries, according to an FWP filing with the Securities and Exchange Commission.

The bookrunners were Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC and UBS Securities LLC.

Proceeds are being used to repay short-term debt, to finance capital expenditures and for general corporate purposes.

The bonds traded late afternoon tighter at 123 bps bid, 120 bps offered, a trader said.

The utility unit of Scana Corp. is based in Cayce, S.C.

Aegon plans $25-par notes

Aegon announced plans for an issue of 30-year non-cumulative subordinated notes in a 424B5 filing with the Securities and Exchange Commission.

The notes (Baa1/BBB) have a face amount of $25 each.

There is talk of a $250 million deal priced in the range of 8% to 8.125%, a trader said. Pricing is expected on Tuesday afternoon.

The bookrunners are Bank of America Merrill Lynch, Citigroup Global Markets Inc., Morgan Stanley and Wells Fargo.

Proceeds are being used for general corporate purposes.

Aegon last sold debt in a $500 million offering of 4.625% six-year debt on Nov. 23, 2009 at Treasuries plus 250 bps.

The life insurance, pension and investment products company is based in the Hague, the Netherlands.

Schwab preps preferreds

Charles Schwab will price fixed-to-floating-rate non-cumulative perpetual preferred stock, series A, according to a 424B5 filing with the SEC.

The preferreds (Baa2/BBB+/BB+) will have a fixed-rate coupon until Feb. 1, 2022 and a floating rate based on Libor after that day. The liquidation preference is $1,000 per preferred.

The deal is being talked at $400 million with a dividend in the 7% area, a market source said. The deal is expected to price on Tuesday, the source added.

Credit Suisse and JPMorgan are the bookrunners.

Proceeds will be used for general corporate purposes, including supporting balance sheet growth and potential migration of client cash balances to bank deposits as 2012 progresses.

The investment and financial services company is based in San Francisco.

Scotiabank tightens

In the secondary market, Bank of Nova Scotia's 1.95% five-year covered bonds (Aaa/AAA) traded tighter going out Monday at 105 bps bid, 102 bps offered, a trader said.

The Halifax, N.S.-based bank sold $2.5 billion of the bonds at a spread of Treasuries plus 109.1 bps on Friday.

eBay flat

eBay's 3.25% notes due 2020 were flat at 115 bps bid, 105 bps offered, a trader said on Monday. "Not the most active bonds."

The notes priced on Oct. 21, 2010 at a spread of Treasuries plus 77 bps.

The issuer is based in San Jose, Calif.

Paul Deckelman contributed to this review

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