FPL Group, Regions Financial, Nordea Bank price bonds, primary tone flat; CVS Caremark wider

By Andrea Heisinger and Paul Deckelman

New York, Nov. 5 - FPL Group Capital Inc., Regions Financial Corp. and Sweden's Nordea Bank AB all sold bonds in the investment-grade bond market on Thursday.

There was a decidedly lower volume of deals pricing than in the previous two days.

"We expected that," a syndicate source said. "I think the big stuff got done [Tuesday and Wednesday]."

The largest deal came from Nordea Bank, which priced an upsized $2 billion of notes in two tranches. A $500 million tranche of three-year notes was added to the original $1.5 billion of five-year notes.

Regions Financial priced a $700 million offering of five-year notes after it went overnight from Wednesday.

FPL Group Capital priced the most quickly of the three, and was also the smallest. The funding arm of utility company FPL sold $200 million of three-year floating-rate notes.

There could be "a couple of things" for Friday, but issuance for the week is likely done, a market source said.

Among the established issues in the secondary arena on Thursday, a market source said the CDX Series 13 North American high-grade index was 2 basis points tighter versus Wednesday's level, at a mid bid-asked spread level of 104 bps.

Advancing issues jumped in front of decliners, by around a nine-to-eight ratio.

Overall market activity, reflected in dollar-volume totals, slid by 22% from Wednesday's pace.

Spreads in general were seen steady, in line with stable Treasury yields; for instance, the yield on the benchmark 10-year notes was unchanged Thursday, at 3.52%.

CVS Caremark Corp.'s bonds widened out, in line with a plunge in its shares, after the Woonsocket, R.I. -based Number-Two U.S. drugstore operator disclosed that its pharmacy benefits management unit lost several billions of dollars of contracts, and also said it was under federal regulatory scrutiny.

Nordea upsizes to two tranches

Swedish financial services company Nordea Bank priced an upsized $2 billion of notes in two tranches.

The deal was altered to include a tranche of three-year notes on top of the original five-year, a source close to the deal said.

The $500 million tranche of 2.5% three-year notes sold at Treasuries plus 120 bps.

A second tranche of $1.5 billion in 3.7% five-year notes priced at 140 bps over Treasuries.

They were sold via Rule 144A.

Bank of America Merrill Lynch, Goldman Sachs & Co. and J.P. Morgan Securities ran the books,

Regions prices two-day deal

Financial holding company Regions Financial priced $700 million of 7.75% five-year senior notes to yield 8% after the sale went overnight from Wednesday.

They came to market at a spread of Treasuries plus 565.2 bps.

Goldman Sachs & Co., J.P. Morgan Securities, Morgan Keegan & Co. and UBS Investment Bank were bookrunners.

Proceeds will be used for general corporate purposes by the issuer based in Birmingham, Ala.

FPL sells floaters

FPL Group Capital sold $200 million of three-year floating-rate notes early in the day at par to yield three-month Libor plus 40 bps.

They are guaranteed by parent company FPL Group, Inc.

A source close to the deal called it "about as straight as you can get." It priced at guidance of Libor plus 40 bps, he said.

Bookrunners were Barclays Capital, Deutsche Bank Securities and RBS Securities.

Proceeds will be added to the company's general funds and used to repay a portion of outstanding commercial paper.

The funding arm of utility Florida Power & Light is based in Juno Beach, Fla.

Primary tone flattens

The primary high-grade market was "fairly dull" by late afternoon, a source said. "There wasn't much to talk about today," he said.

The busiest days of the week came on Tuesday and Wednesday as issuers tried to sell bonds either before or after the two-day Federal Reserve meeting.

"Everyone already got the biggies out of the way," the source said.

The coming week is expected to be busier, especially the top of the week ahead of a mid-week Veteran's Day market close.

A second syndicate source called the coming two weeks "stacked for issuance."

"We should be active - about the same [as this week]," he said.

CVS on the slide

CVS Caremark's bonds were among some of the most actively traded credits on the day after the company reported third-quarter earnings - and dropped the bombshells on investors about the lost contracts and the federal probe.

A market source quoted CVS' 6.125% bonds due 2039 as having widened out about 12 bps on the session from Wednesday's close to 185 bps over.

The source saw CVS's 5.75% notes due 2017 having moved out about 4 bps on the day to the 120 bps level.

At another desk, a source said the 2039 bonds were likely the busiest investment-grade issue of the day, with over $150 million having changed hands at mid-afternoon, and quoted them having widened out to 190 bps over.

The source also saw the 5.75% notes of at least $65 million shares in the afternoon.

The source further saw busy activity in several other CVS issues, with its 6.60% notes due 2019 having traded over $20 million, at a spread of 165 bps over.

CVS's 4.875% notes due 2014 also traded over $20 million, widening to about 104 bps over.

The bonds all widened out after CVS - while reporting that net income in the third quarter advanced to $1.02 billion, or 71 cents a share, from $732.5 million, or 50 cents, a year earlier - also admitted that its important pharmacy benefits management business was wallowing in red ink.

Its chairman and chief executive officer, Tom Ryan, said on a conference call with investors following release of the quarterly results, said that its unit for managing pharmacy benefits lost $3.7 billion in contracts during the quarter.

Ryan said the division - which negotiates drug prices with manufacturers for corporate and government customers -- lost more business than anticipated. As a result, margins and operating profit at the pharmacy-benefits management operation will shrink between 10% and 12% in 2010.

There was further bad news coming out about the company on Thursday, which besides causing its bonds to backpedal, dropped its New York Stock Exchange-traded shares for a loss of $7.28, or 20.14%, as they finished at 28.87. Volume of 185 million shares was 15 times the norm.

The Federal Trade Commission said it is investigating CVS' business practices. CVS said Thursday that it is confident it conducts business in compliance with antitrust laws.

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