First Niagara, Developers Diversified price deals, Hartford plans sale; banks trade firmer

By Andrea Heisinger

New York, March 16 - Developers Diversified Realty Corp. and First Niagara Financial Group, Inc. each priced upsized sales on an otherwise quiet Tuesday in the investment-grade market, where the focus was on a Federal Reserve Board meeting and other news out of Washington.

Both sales were priced about the time that an announcement came out of the meeting that key rates remained unchanged and near zero. This was an expected move by the Fed, but some were watching for cues about when a rate increase might take place.

Developers Diversified offered $300 million of split-rated seven-year notes. The amount was increased from $250 million.

First Niagara also increased the size of its deal to $300 million of 10-year notes from $250 million.

Hartford Financial Services Group Inc. announced plans to sell senior notes as part of an effort to repurchase preferred shares issued to the government as part of the Troubled Asset Relief Program. About $1.1 billion in bonds are to be sold, including some to pre-fund future note maturities.

Trading focused mostly on the financial sector - with firmness seen in banks - and outstanding bonds as there was little in the way of new deals in the secondary market.

Investor interest had dropped on Monday ahead of the Fed meeting, and remained down at the end of the day.

The Developers Diversified Realty bond was seen trading slightly up from where it had priced.

Two bonds priced late the previous day by Commonwealth Bank of Australia had made modest moves tighter, but there was not much activity seen in them.

Overall volume was "about average" for the day after a low-activity start to the week in the investment-grade secondary.

Developers Diversified offers split-rated notes

Developers Diversified Realty sold an upsized $300 million of 7.5% seven-year split-rated senior unsecured notes (Baa3/BB) by early afternoon to yield 7.5%, a source away from the deal said.

The size was originally $250 million for the deal that was priced off the high-grade syndicate desk.

The notes came to market with a spread of 437.4 bps over Treasuries.

Bookrunners were Bank of America Merrill Lynch, Deutsche Bank Securities and UBS Investment Bank.

The proceeds will be used to repay debt.

The real estate investment trust is based in Beachwood, Ohio.

First Niagara upsizes 10-years

First Niagara Financial Group sold an upsized $300 million of 6.75% 10-year senior unsecured notes (Baa1/BBB-/BBB) at par to yield 6.75%, an informed source said.

The notes sold at a spread of Treasuries plus 306.7 bps.

Goldman Sachs & Co. and J.P. Morgan Securities were bookrunners.

Proceeds are being used to redeem $150 million of 12% notes due Sept. 10, 2014 and repay $50 million in debt under a line of credit extended by Fifth Third Bank, along with general corporate purposes.

The financial services company is based in Lockport, N.Y.

New bonds expected after Fed

There was little new issue activity in the high-grade market for the day, with one of the two deals that priced being split-rated.

"It's what was expected," a market source said of the lull that normally happens on the day of a Fed meeting.

There should be at least a slight uptick in the names hitting the market in the coming day or two.

One source said that "maybe the new issue market will come back to life tomorrow."

The tone was "not bad" to end the day, with banks especially on an upbeat note after a proposal to reform Wall Street came out and its contents were felt to be manageable.

Deal activity had been expected to drop off after brisk volume in recent weeks, but one source said there should be a bit more action in the primary at least on Wednesday.

"We do have a couple on the sidelines," he said.

Hartford plans notes, TARP repayment

Hartford Financial Services announced plans late in the day to issue $1.1 billion in senior notes as part of a plan to repurchase preferred shares issued to the U.S. Treasury Department under its Capital Purchase Program, according to a press release.

There will be $425 million of notes issued to repurchase the preferred stock from the government, along with equity and convertible preferred share sales.

The company also plans to issue $675 million in notes to pre-fund the purchase of senior debt maturing in 2010 and 2011.

Bookrunners for the note sale are Goldman Sachs & Co., J.P. Morgan Securities, Citigroup Global Markets, Credit Suisse Securities and Wells Fargo Securities.

The preferred shares will be repurchased from the government once approval is given by the Treasury.

The insurance and financial services company is based in Hartford, Conn.

Citigroup exercises greenshoe

Citigroup Capital XII exercised the overallotment option in full for its 30-year hybrid trust preferred securities (Ba1/BB-/BB-) to add $300 million, or 12 million securities, according to an FWP filing with the Securities and Exchange Commission.

The bank priced $2 billion, or 80 million shares, on March 10. They have a fixed dividend of 8.5% up to and including March 30, 2015, and then a floating rate of three-month Libor plus 587 basis points until maturity or redemption.

The notes priced at a liquidation amount of $25 each. They were talked in the 8.5% area, and priced in line with that.

The securities are guaranteed by Citigroup Inc.

Citigroup Global Markets was the bookrunner.

The securities were sold to replenish capital after a repayment of bailout money to the government.

The financial services company is based in New York City.

Banks trade actively, firm

Paper from big banks remained active for the second day of the week as investors remained interested in the sector, a source said.

Banks were firmer overall, a trader said. Bank of America Corp. bonds were about 5 bps tighter, and Goldman Sachs Group Inc. notes were 3 to 5 bps better. Citigroup Inc. was the big mover at 5 to 10 bps improved.

Outstanding bonds from Goldman Sachs Group, Bank of America and Royal Bank of Scotland plc were among the day's most traded.

A 5.375% bond due 2020 from Goldman Sachs was at the top of trading volume by early afternoon, with a spread of 155 bps.

RBS's recent 4.875% note due 2015 was also popular, and traded at 366 bps. Bank of America had a couple of active bonds.

The activity and tightening in bank bonds may have had a little to do with the Fed not moving interest rates, but likely had more to do with the U.S. Senate bill introduced by Senator Chris Dodd. It is aimed at changing financial regulations, especially at large Wall Street firms and banks.

"There wasn't really anything extreme in it that was unexpected," a trader in the financial sector said at the end of the day, explaining why bank paper had improved.

Nestled among these most-active names was the 6% note due 2020 from Boston Scientific Corp. that had been trading busily on Monday in both the high-grade and high-yield secondary markets.

The medical-devices maker was in the headlines after it voluntarily halted production on a heart defibrillator after a paperwork mix-up with the Food and Drug Administration.

Commonwealth Bank mostly unchanged

Two of the three tranches of the $3.5 billion deal priced late on Monday by Commonwealth Bank of Australia were seen trading on Tuesday, but had made only minor moves tighter, traders said.

There was "very little" activity in the bank's bonds, a source said.

One trader said the 3.5% notes due 2015 that priced at 120 bps over Treasuries were at 115 bps bid, 110 bps offered early in the day. Later, they were seen giving some of the gain up at 116 bps offered with no bid.

The 5% bond due 2020 was sold at Treasuries plus 135 bps. Early in the day they were at 132 bps bid, 128 bps offered, a source said. Later, they were wider at 134 bps offered.

A third tranche of floaters was not seen trading.

Developers Diversified trades up

The new split-rated 7.5% bond due 2017 from Developers Diversified was trading up on a dollar basis soon after pricing, a source said.

The bond sold at 99.995 and was quoted at a bid of 100.25 and offer of 100.75.

A source in the high-yield secondary said the bond did "pretty good" in trading. It moved to par, then to 100.75, then back down to par during the afternoon.

A new bond from First Niagara Financial Group was not seen in the secondary, a trader said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.