Financials dominate post-holiday supply; Capital One, U.S. Bancorp notes firm

By Aleesia Forni

Virginia Beach, April 21 - Financial names dominated Monday's primary market, kicking off what is expected to be a busy week for the investment-grade primary market.

The session saw new deals from Capital One Financial Corp., Goldman Sachs Group Inc., U.S. Bancorp and U.S. Bank NA.

Capital One Financial sold a $1.5 billion issue of notes in two equal tranches on Monday.

A $750 million tranche of 2.45% five-year notes sold with a spread of Treasuries plus 75 basis points.

Pricing was at the tight end of the Treasuries plus 80 bps area talk, which had tightened around 10 bps from initial guidance.

There was also $750 million of 3.75% 10-year notes priced at 105 bps over Treasuries.

Pricing was at the tight end of the Treasuries plus 110 bps area talk. Guidance was set in the area of 115 bps over Treasuries.

Meanwhile, U.S. Bancorp and U.S. Bank NA sold $2.75 billion of notes in three tranches.

U.S. Bank priced $1.25 billion of two-year floating-rate notes at par to yield Libor plus 12 bps.

U.S. Bancorp priced $250 million of five-year floaters to yield Libor plus 40 bps and $1.25 billion five-year notes at Treasuries plus 50 bps.

Goldman Sachs Group was in Monday's market with two new issues of preferred stock.

The bank priced $1.3 billion of 5.7% $1,000-par series L fixed-to-floating-rate noncumulative perpetual preferred stock, according to a market source on Monday.

Goldman Sachs Group also priced $700 million of 6.375% $25-par series K fixed-to-floating-rate noncumulative perpetual preferred stock, a market source said.

Sources continue to expect the bulk of the week's supply to come from the financial sector, with around $20 billion of paper expected to price.

Activity was light in the secondary market during Monday's session following the extended Easter holiday weekend.

The Markit CDX North American Investment Grade series 22 index was unchanged at a spread of 67 bps.

U.S. Bancorp's notes due 2019 were quoted 2 bps tighter late during the session, a market source said.

Meanwhile, Capital One's two tranches of notes traded unchanged to tighter in the secondary.

After freeing, Goldman Sachs' $25-pars were seen at $25.02 bid, while the $1,000-pars were at 101.375 bid, a source said.

The source added that the $1,000-pars closed just slightly higher, closer to 101.5.

U.S. Bancorp prices tight

U.S. Bancorp and U.S. Bank NA priced $2.75 billion of notes in three parts on Monday, according to market sources and two FWP filings with the Securities and Exchange Commission.

U.S. Bank sold $1.25 billion of two-year floating-rate notes (Aa3/AA-/AA) at par to yield Libor plus 12 bps.

U.S. Bancorp priced $250 million of senior notes (A1/A+/AA-) at par to yield three-month Libor plus 40 bps.

U.S. Bancorp also sold $1.25 billion five-year notes (A1/A+/AA-) at 99.91 to yield 2.219, or Treasuries plus 50 bps.

A trader quoted the notes at 48 bps bid, 46 bps offered late Monday.

Bookrunners were Barclays, Morgan Stanley & Co. LLC and US Bancorp Investments Inc.

The financial services company is based in Minneapolis.

Capital One two-parter

Capital One Financial priced $1.5 billion of senior notes (Baa1/BBB/A-) in tranches due 2019 and 2024, according to a market source.

The sale included $750 million of 2.45% five-year notes at 99.925 to yield 2.466%, or Treasuries plus 75 bps.

The notes were seen at 75 bps bid in aftermarket trading.

Pricing was at the tight end of the Treasuries plus 80 bps area talk, which had tightened from Treasuries plus 90 bps area.

A second tranche was $750 million of 3.75% notes due 2024, which sold with a spread of Treasuries plus 105 bps.

Pricing was at 99.909 to yield 3.761%.

The notes sold at the tight end of talk, which was set in the area of Treasuries plus 110 bps, around 5 bps tighter compared to initial guidance.

A trader quoted the 10-year tranche of notes at 104 bps bid.

The bookrunners were Credit Suisse Securities (USA) LLC, Goldman Sachs & Co., J.P. Morgan Securities LLC and Wells Fargo Securities LLC.

Proceeds will be used for general corporate purposes, including the repayment of debt, acquisitions, additions to working capital, capital expenditures and investments in its subsidiaries.

The financial services company is based in McLean, Va.

Goldman's series L preferreds

Goldman Sachs Group sold $1.3 billion of 5.7% $1,000-par series L fixed-to-floating-rate noncumulative perpetual preferred stock, according to a market source on Monday.

The preferreds will be issued as depositary shares representing a 1/25th interest.

Goldman Sachs is the joint bookrunning manager.

When declared, dividends will be payable at a fixed rate on a semiannual basis until May 10, 2019, at which time the dividend will float at Libor plus 388.4 bps.

Once floating, the preferreds' dividend will be payable quarterly.

The preferreds become redeemable on or after May 10, 2019 at par plus accrued dividends. The bank can also redeem the shares in whole within 90 days of a regulatory capital treatment event.

The new securities will not be listed on any exchange.

Proceeds will be used to provide additional liquidity and for general corporate purposes.

Goldman sells $25-par preferreds

Goldman Sachs Group priced $700 million of 6.375% $25-par series K fixed-to-floating-rate noncumulative perpetual preferred stock, according to a market source on Monday.

The preferreds will be issued as depositary shares representing a 1/1,000th interest.

Goldman Sachs, BofA Merrill Lynch, Citigroup Global Markets Inc., Morgan Stanley, RBC Capital Markets, UBS Securities LLC and Wells Fargo Securities are the joint bookrunning managers.

When declared, dividends will be payable at a fixed rate on a quarterly basis until May 10, 2024, at which time the dividend will float at Libor plus 282.5 bps.

The preferreds become redeemable on or after May 10, 2024 at par plus accrued dividends. The bank can also redeem the shares in whole within 90 days of a regulatory capital treatment event.

The New York-based firm will use proceeds to provide additional liquidity and for general corporate purposes.

Bank/brokerage CDS unchanged

Investment-grade bank and brokerage CDS prices were unchanged, according to a market source.

Bank of America Corp.'s CDS costs were unchanged at 64 bps bid, 67 bps offered. Citigroup Inc.'s CDS costs were flat at 70 bps bid, 73 bps offered.JPMorgan Chase & Co.'s CDS costs were also flat at 57 bps bid, 60 bps offered. Wells Fargo & Co.'s CDS costs were unchanged at 37 bps bid, 40 bps offered.

Merrill Lynch's CDS costs were flat at 67 bps bid, 71 bps offered. Morgan Stanley's CDS costs were unchanged at 75 bps bid, 80 bps offered. Goldman Sachs Group's CDS costs were also unchanged at 88 bps bid, 93 bps offered.

Stephanie Rotondo contributed to this review

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