BofA brings $4.5 billion offering to primary; Bank of America firms; Family Dollar gains

By Aleesia Forni and Cristal Cody

Virginia Beach, Aug. 21 – Bank of America Corp. came to Thursday’s primary market with a $4.5 billion offering of senior notes, adding some life to an otherwise quiet week for the primary market.

The offering comes on the heels of the bank’s record $16.65 billion fine imposed by the government over allegations that it misled investors into purchasing faulty mortgage-backed securities prior to the financial crash in 2008.

Bank of America sold a 10-year offering of subordinated notes, along with fixed- and floating-rate tranches due 2017, which were added later during the session.

The deal was met with solid demand, with both fixed-rate tranches pricing at the tight end of talk and attracting an orderbook that was nearly three times oversubscribed.

In other primary news, Fannie Mae sold a $3 billion offering of Benchmark Notes due 2017.

The week’s total supply now sits at $6.1 billion, topping what was expected to be around a $5 billion week.

With Friday’s economic symposium in Jackson Hole, Wyo., new issuance in the investment-grade bond market is likely wrapped for the week.

Investment-grade bond spreads tightened over the session with bonds mostly better in secondary trading, sources said.

The Markit CDX North American Investment Grade series 22 index firmed 2 basis points to a spread of 56 bps.

Bank of America’s two tranches of fixed-rate notes priced during the session traded 3 bps to 5 bps tighter, a trader said.

Family Dollar Stores, Inc.’s 5% senior notes due 2021 headed out better in the secondary market after the company rejected Dollar General Corp.’s $9.7 billion cash takeover bid announced on Monday, a trader said.

Family Dollar said in a release the board rejected the offer on antitrust regulations concerns and continues to support a merger with Dollar Tree Inc., which announced in late July that it would acquire the discount retailer for $8.5 billion in cash and stock.

Dollar General’s bonds traded mostly flat to slightly higher over the day, according to a trader.

BofA three-parter

The primary market saw Bank of America price $4.5 billion of notes (Baa3/BBB+/BBB+) in three tranches on Thursday, a market source said.

There was $500 million of floating-rate notes due 2017 priced at par to yield Libor plus 61 bps.

The sale also included $1 billion of 1.7% three-year notes priced at 99.895 to yield 1.736%, or Treasuries plus 80 bps.

Pricing was at the tight end of the Treasuries plus 85 bps area talk.

A third tranche was $3 billion of 4.2% subordinated notes due 2024 priced at 180 bps over Treasuries.

The bank priced the notes at the tight end of the Treasuries plus 185 bps area talk.

The notes sold at 99.927 to yield 4.209%.

Bank of America’s notes due 2017 tightened to 77 bps bid in aftermarket trading, a trader said.

The bank’s tranche of notes due 2024 firmed to 175 bps bid, 173 bps offered, according to the trader.

Proceeds will be used for general corporate purposes.

BofA Merrill Lynch was the bookrunner.

Bank of America is a financial services company based in Charlotte, N.C.

Fannie Mae Benchmark Notes

Also on Thursday, Fannie Mae priced $3 billion of 1% three-year Benchmark Notes at Treasuries plus 19.5 bps, according to a company news release and a market source.

Pricing was at 99.643 to yield 1.118%.

Barclays, Deutsche Bank Securities Inc. and Morgan Stanley & Co. LLC were the joint lead managers.

By region, U.S. investors picked up 53.3%, Asian investors 16% and European investors 9.3%.

Central banks accounted for 42.4% of investors, fund managers 34%, commercial banks 8.7%, corporate and pensions 6.8%, state and local governments 6.2%, insurance companies 1.8% and foundations and non-profits 0.1%.

The government-backed mortgage lender is based in Washington, D.C.

Family Dollar stronger

Family Dollar Stores’ 5% notes due 2021 headed out higher at 104.75 offered, a trader said.

The notes saw light trading on Wednesday, going out at 103.38 to yield 4.39%, according to market sources.

Family Dollar sold $300 million of the bonds on Jan. 25, 2011 at 99.494 to yield 5.065%.

The discount retail company is based in Matthews, N.C.

Dollar General flat to higher

Dollar General’s 3.25% senior notes due 2023 rose slightly over the day to 91.125 offered, a trader said.

The notes were quoted on Wednesday afternoon at 89.652 bid, 90.50 offered.

Dollar General sold $900 million of the bonds on April 8, 2013 at 99.737 to yield 3.281%.

The discount retailer is based in Goodlettsville, Tenn.

Bank/brokerage CDS costs lower

Investment-grade bank and brokerage CDS prices were lower again on Thursday, according to a market source.

Bank of America’s CDS costs ended 1 bps tighter at 65 bps bid, 68 bps offered. Citigroup Inc.’s CDS costs were flat at 66 bps bid, 69 bps offered. JPMorgan Chase & Co.’s CDS costs fell 1 bp to 52 bps bid, 55 bps offered. Wells Fargo & Co.’s CDS costs were flat at 41 bps bid, 44 bps offered.

Merrill Lynch’s CDS costs closed 1 bp tighter at 68 bps bid, 72 bps offered. Morgan Stanley’s CDS costs ended 1 bp tighter at 72 bps bid, 75 bps offered. Goldman Sachs Group, Inc.’s CDS costs were flat at 72 bps bid, 77 bps offered.

Paul Deckelman contributed to this review.

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