Westpac, BB&T price deals, primary watches earnings; spreads tighten; JPMorgan preferreds gain

By Andrea Heisinger and Paul Deckelman

New York, Oct. 21 - Westpac Banking Corp. and BB&T Capital Trust VII were among the few issuers in the investment-grade primary market on Wednesday, sources said. There was also a sale in the emerging markets sector.

The glut of foreign banks and companies tapping the U.S. market during earnings season continued, with Australian bank Westpac pricing $1 billion of two-year floaters.

This sale was followed by BB&T Capital Trust selling an upsized $325 million of trust preferred securities with a final maturity of 2069. It was an increase from the $200 million originally planned, with the sale coming in at the tight end of guidance.

There could be "a fair amount" of issuance on Thursday, a source said, based on the number of banks and companies that released earnings in the past two days. Wednesday ended on a good note, he said, after two of the largest bank names announced positive third quarter earnings.

Among the established issues in the secondary arena on Wednesday, a market source said the CDX Series

13 North American high-grade index was 4 basis points wider versus Tuesday's level, at a mid bid-asked spread level of 102 bps.

Advancing issues led fell behind decliners by a 10-to-nine margin, breaking a three-session streak in which they had been on top.

Overall market activity, reflected in dollar-volume totals, was up about 2.5% from Tuesday's pace.

Spreads in general were seen tighter, in line with mostly higher Treasury yields; for instance, the yield on the benchmark 10-year notes widened by 5 bps on Wednesday to 3.39%.

The new J.P. Morgan Chase & Co. trust preferred securities continued to trade considerably tighter than the level at which they had priced on Tuesday.

BB&T offers trust preferreds

BB&T Capital Trust sold an upsized $325 million, or 13 million, of 8.1% enhanced trust preferred securities at par of $25, a source close to the deal said.

The size was increased from $200 million, the source said.

The sale came at the tight end of guidance for the 8.25% area, the source said. It was launched at 8.1%.

The notes have an initial maturity of 2064, and a final maturity of 2069 if the notes are not redeemed prior to Nov. 1, 2019.

There is an over-allotment option of $25 million, or 1 million securities.

The process of the sale is further representation of a shift in how trust preferred deals are done, the source said.

"It used to be that those [sales] in the $25 par space were more drawn out," he said. "That was when they were larger. We don't do that anymore because they're so small."

The BB&T sale was announced at about 10 a.m. ET, and priced by about 3:30 p.m. ET, he said.

BB&T Capital Markets, Bank of America Merrill Lynch, Morgan Stanley and Wells Fargo Securities were bookrunners.

Proceeds will be used for general corporate purposes.

The deal is guaranteed by parent financial services company BB&T Corp., based in Winston-Salem, N.C.

Westpac sells floaters

Australia's Westpac Banking priced $1 billion of two-year floating-rate notes at par to yield three-month Libor plus 30 bps, an informed source said at mid afternoon.

They were sold via Rule 144A.

Deutsche Bank Securities ran the books.

The financial services company is based in Sydney.

Focus on bank earnings

Two of the largest banking and investment banking names reported earnings early in the day. Morgan Stanley and Wells Fargo & Co. each had positive third quarters, and beat analyst expectations.

Morgan Stanley came from a string of quarterly losses to post a $498 million profit. This was a stark downturn from its $7.7 billion profit from a year ago.

Wells Fargo had $3.2 billion of income for the quarter, beating expectations.

"I don't know that it really did anything," a syndicate source who worked on one of the day's offerings said. "I didn't see much change. They [earnings] were what were expected."

Other non-bank earnings from investment-grade-rated companies included drug maker Eli Lilly & Co., which reported third quarter income of $941.8 million.

Tobacco company Altria Group Inc. earned $882 million for the quarter.

There is nothing set to price on Thursday or Friday, although some of the banks and other companies that have recently announced Q3 numbers could tap the market.

"Things aren't too bad out there," the syndicate source said. "I'm sure there are a lot of companies that need to sell [bonds] before the end of the year to lock in rates. They have a little time, though."

JP Morgan trust preferreds trade strongly

A trader saw J.P. Morgan's 7% junior subordinated trust preferred securities due 2039 trading at a spread over comparable Treasury issue of 273 bps bid, 270 bps offered, which he called "a couple [of basis points] better" on the day.

The New York-based banking giant had priced $1 billion of the securities on Tuesday at 287.5 bps over, and they had been quoted having tightened in initial aftermarket dealings later that same session at 276 bps bid, 274 bps offered.

A trader at another shop saw the new J.P. Morgan paper offered at 272 bps, having tightened from 275 bps earlier in the day.

Meccanica move over

A trader saw Tuesday's Mecannica Holdings 6.25% bonds due 2040 at pretty much the same levels Wednesday as those to which they had tightened Tuesday after pricing.

The $500 million issue - upsized from $350 million originally - traded at 198 bps bid, 195 bps offered, little changed from the levels around 198 bps bid, 192 bps offered seen late Tuesday.

A second trader saw the bonds offered at 195 bps over, though with no bid.

The bonds had tightened into the 190s on Tuesday, after having priced earlier that session at 210 bps over.

Foreign firms still hold sway

The second trader noted that the new-issue market is "still dominated by foreign names," such as Italy-based Meccanica, as domestic issuers for the most part eschew marketing bonds during the earnings season due to federal "quiet period" regulations.

However, the trader continued, "corporate flow was pretty good," on Wednesday, "as people are still looking for yield."

Despite a dearth of new domestic issues, there was some active trading in established bonds, with a market source seeing publisher R.R. Donnelley & Sons' 11¼% notes due 2019 having firmed by nearly 30 bps on the session to around the 425 bps level.

Among the financials, Wells Fargo Bank's 4¾% notes due 2015 were also in about 30 bps, to around the 200 bps level, while General Electric Capital Corp.'s 6.15% bonds due 2037 tightened by a dozen bps to around the 230 bps over mark.

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