Viacom, ERP price as Citi reopens debt, First Niagara does preferreds; Transocean firms

By Andrea Heisinger and Cristal Cody

New York, Dec. 7 - Issuance in the primary investment-grade bond market didn't halt on Wednesday, but the size of deals did get smaller if not less in number from the previous day.

Viacom Inc. announced and priced a $1 billion trade in five- and 10-year tranches with a quick turnaround.

The notes were joined by ERP Operating LP, which ended up doubling the size of its deal from $500 million to $1 billion of 10-year notes.

Citigroup Inc. reopened its issue of 4.5% notes due 2022 to add $250 million. It brings the total issuance of the debt to $1.25 billion.

There was also a $494.1 million offering of 23-year paper by CVS Caremark Corp. Barclays Capital Inc. was the bookrunner for the deal for which terms were not available at press time.

First Niagara Financial Group Inc. sold an upsized $350 million of fixed-to-floating-rate perpetual preferred stock.

Thanks to a lack of negative headlines or economic data, so far the week has been ideal for companies willing to pay a somewhat high new issue concession to tap the market, sources said.

One source said late in the day that "everyone announced early today, and everything went well."

Companies are eager to price debt ahead of the holidays to fulfill financing needs.

"People want to get in by the week of the 19th, so knock on wood," the source said.

Overall trading volume was about $12.6 billion.

Viacom's deal was seen only in the gray markets since it priced late afternoon.

Hewlett-Packard Co.'s new 10-year notes traded 18 basis points tighter on Wednesday.

Transocean Inc.'s existing and new bonds priced on Nov. 30 also continue to be actively traded and stronger in the secondary market, a source said.

"It's the bottom of investment-grade, but it's a name that people recognize," the source said.

Bank and financial paper was "doing quite a bit better," a trader said.

Morgan Stanley is up about 10 points from November, the trader said.

General Electric Capital Corp.'s notes also are trading a bit stronger.

"They never got that cheap," a trader said.

Investment-grade bank and brokerage credit default swaps costs traded lower on Wednesday, indicating more investor confidence in the financial sector.

Traders saw CDS costs for both bank paper and brokerage company paper unchanged to 10 bps lower.

The Markit CDX Series 17 North American high-grade index firmed 2 bps to a spread of 120 bps on Wednesday.

Treasuries rallied, sending yields down on Wednesday. The 10-year note yield fell to 2.03% from 2.08%. The 30-year bond yield dropped 4 bps at 3.06%.

Viacom's two tranches price

Viacom sold an upsized $1 billion of senior notes (Baa1/BBB+/BBB+) in two tranches, an informed source said.

The deal size was increased from a talked $750 million, the source said. There was roughly $6 billion on the books for the sale, skewed more toward the 10-year notes.

"There was a ton of demand," the source said.

The $400 million of 2.5% five-year notes priced at a spread of Treasuries plus 175 bps. They were sold at the tight end of guidance in the 180 bps area.

There was also a $600 million tranche of 3.875% 10-year notes sold at 205 bps over Treasuries. The notes priced at the tight end of talk in the 210 bps area.

Bank of America Merrill Lynch, Citigroup Global Markets Inc. and RBS Securities Inc. were the bookrunners.

Proceeds are being used to repay debt, including borrowings under a commercial paper program, and for general corporate purposes, including common stock share repurchases.

Viacom's new deal was seen in the gray markets late afternoon.

The five-year notes were quoted in the grays at 175 bps bid, 173 bps offered. The 10-year notes traded at 205 bps bid, 203 bps offered.

The entertainment company is based in New York City.

Citi reopens 10-year

Citigroup reopened its issue of 4.5% notes due 2022 to add $250 million, according to an FWP filing with the Securities and Exchange Commission.

The notes (A3/A-/A+) were sold at a spread of Treasuries plus 290 bps.

Total issuance is $1.25 billion, including $1 billion of notes priced on Oct. 25 at Treasuries plus 245 bps.

The bookrunner was Citigroup Global Markets Inc.

The financial services company is based in New York City.

ERP Operating upsizes

ERP Operating priced $1 billion of 4.625% 10-year senior notes (Baa1/BBB+/BBB+) to yield Treasuries plus 265 bps, a source close to the trade said.

The size of the trade was doubled from $500 million.

The securities were priced at the tight end of guidance, which was in the 270 bps area.

Bookrunners were Bank of America Merrill Lynch, Barclays Capital Inc. and Morgan Stanley & Co. LLC.

Proceeds are being used for working capital and general company purposes, including repayment of an outstanding balance under an unsecured revolving credit facility.

ERP Operating last priced debt in a $600 million sale of 4.75% notes due 2020 on July 12, 2010 at Treasuries plus 180 bps.

The multi-family residential property arm of Equity Residential is based in Chicago.

First Niagara sells hybrids

First Niagara Financial Group brought a $350 million underwritten offering of fixed-to-floating rate series B noncumulative perpetual preferreds.

The deal was originally slated to be $250 million, but demand was about $450 million to $475 million, according to a market source. Therefore, the company elected to increase the size of the deal.

There is also a $37.5 million over-allotment option.

In addition to increasing the size, the initial dividend was "reigned in" to 8.625% from 8.75%. The rate is fixed until Feb. 15, 2017, at which time it will be based on three-month Libor plus a percentage spread.

"It seems to have gone very well," the source said, seeing the issue offered between $25.15 and $25.20 in the gray market.

"It's the first financial that's done really well in a long time," he said. "It indicates that people are starved for yield."

Goldman Sachs & Co. is the global coordinator for the offering, and Bank of America Merrill Lynch will serve as the physical bookrunner. Goldman Sachs, Merrill Lynch and Wells Fargo Securities, LLC are the joint bookrunners.

Proceeds will be used to complete the Buffalo, N.Y.-based bank's acquisition of branches of HSBC Bank USA, NA, which was announced July 31.

HP tightens

Hewlett-Packard sold $3 billion of global debt (A2/BBB+/A) in three tranches on Tuesday.

The 4.65% notes due 2021, which priced in a $1.5 billion offering at 260 bps over Treasuries, firmed to 242 bps bid, a trader said Wednesday.

"It's performed pretty well," the trader said.

The computer and technology company is based in Palo Alto, Calif.

Transocean better

Transocean's new 5.05% senior notes due 2016 (Baa3/BBB-/BBB-), which priced on Nov. 30 in a $1 billion tranche at a spread of Treasuries plus 410 bps, are trading "into 365ish right now," the source said. "They've outperformed."

The offshore oil and gas drilling contractor is based in Zug, Switzerland.

Morgan Stanley trades higher

Morgan Stanley's 5.5% senior note issue due 2021 "has been a popular issue here," one trader said.

The 10-year notes are trading in the 94 range.

"The low was 84.19 on Nov. 25, right after Thanksgiving," the trader said. "It's up about 10 points."

Morgan Stanley sold $1 billion in an add-on to the issue (A2/A/A) on Oct. 27 at 98.533.

The financial services company is based in New York City.

GE Capital firms

General Electric Capital's 4.65% notes due 2021 have traded in about 20 bps to 226 bps bid from where they priced in October, a trader said.

The notes (Aa2/AA+) were sold in a $1.75 billion tranche at a spread of Treasuries plus 247 bps on Oct. 12.

The funding arm of General Electric Co. is based in Fairfield, Conn.

Paul Deckelman and Stephanie Rotondo contributed to this review

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