Florida Power & Light, IDEX, First Niagara tap primary; Morgan Stanley paper hit in trading

By Andrea Heisinger

New York, Dec. 8 - The investment-grade bond market remained active on Thursday with smaller sales from Florida Power & Light Co., IDEX Corp. and First Niagara Financial Group, Inc.

Florida Power had the largest deal of the day, an upsized $600 million of 30-year first mortgage bonds. The size was increased by $200 million.

IDEX sold $300 million of 10-year paper to repay debt.

First Niagara Financial priced $300 million of 10-year paper via Goldman Sachs & Co. and Sandler O'Neill & Partners LP to help pay for the acquisition of HSBC Bank USA branches. The terms were unavailable at press time.

Financial bonds were the focus of the secondary side of the market as bank and brokerage names took a hit. Morgan Stanley's bonds were said to widen the most.

"The financial complex was generally hit," a trader said. "High-beta brokers got it the worst."

The cost of insuring bank and brokerage names against default rose, showing decreased confidence in the sector, a source said.

Bank names saw their credit default swap costs widen by 6 to 20 bps, and brokerage CDS costs were about 20 bps worse across the board.

New issues generally tightened slightly. Florida Power's bonds came in, and IDEX's new issue traded unchanged.

The previous day's two-tranche, $1 billion issue from Viacom Inc. was unchanged to 6 bps tighter. ERP Operating LP's notes due 2021 were 8 to 9 bps improved.

Overall trading volume was "on the light side" at about $8.82 billion.

Treasury yields ended the day tighter across the board compared to Wednesday, a source said. The 30-year bond had one of the biggest gains, coming in 7 bps to 2.99%. The five-year note was tighter by 4 bps at 0.84%, and the 10-year note tightened 6 bps to yield 1.97%.

Florida Power prices tight

Florida Power & Light priced an upsized $600 million of 4.125% 30-year first mortgage bonds (Aa3/A/AA-) to yield Treasuries plus 115 bps, an informed source said.

The size of the trade was increased from $400 million. The deal was done at the tight end of guidance in the 120 bps area.

Barclays Capital Inc., Citigroup Global Markets Inc., Goldman Sachs & Co., Mizuho Securities USA Inc., Scotia Capital (USA) Inc. and Wells Fargo Securities LLC were the bookrunners.

Proceeds are being added to general funds to repay a portion of outstanding commercial paper and for general corporate purposes.

In the secondary market, the bonds were seen tightening immediately. A trader quoted them at 114 bps bid, 111 bps offered.

Florida Power last priced $250 million of 5.125% 30-year bonds on June 6 at 87 bps over Treasuries.

The electric subsidiary of NextEra Energy, Inc. is based in Juno Beach, Fla.

IDEX upsizes

IDEX priced an upsized $350 million of 4.2%10-year senior notes (Baa2/BBB/BBB+) to yield 225 bps over Treasuries, according to a market source and an FWP filing with the Securities and Exchange Commission.

The size was increased from $300 million, a source said. Initial price guidance was in the 250 bps area.

"We were able to bring that one in quite a lot," a source said.

The notes have an effective interest rate of 5.4% due to a forward-starting swap entered into in July, according to a press release.

Bank of America Merrill Lynch, J.P. Morgan Securities LLC and Wells Fargo Securities were the bookrunners.

Proceeds will be used to repay a portion of debt under a domestic multi-currency bank revolving credit facility and for general corporate purposes, including strategic acquisitions.

The new 10-year notes were unchanged to slightly tighter in trading, a source said. The notes were quoted at 225 bps bid, 220 bps offered.

IDEX was last in the market with a $300 million sale of 4.5% 10-year notes on Dec. 1, 2010 at 160 bps over Treasuries.

The industrial pumping and dispensing products maker is based in Lake Forest, Ill.

National Rural gives terms

National Rural Utilities Cooperative Finance Corp. sold $175 million of one-year medium-term senior floating-rate notes (A2/A) at par to yield Libor plus 12.5 bps, according to an FWP filing with the SEC.

The agent was Mizuho Securities USA Inc.

The market lender for electric cooperatives is based in Herndon, Va.

Morgan Stanley bonds hit

Morgan Stanley was on one trader's radar in the bond market as the investment bank's stock took a hit due to its exposure to French banks.

The 5.5% notes due 2021 issued by Morgan Stanley were quoted at 459 bps bid, 450 bps offered late in the day, although the trader said they were seen earlier as wide as 465 bps bid. On Wednesday, the paper was trading at 445 bps bid, 430 bps offered.

Morgan Stanley's 5.25% debt due Nov. 2, 2012 was seen among the most actively traded issues of the day, a source said.

A second trader noted that while Morgan Stanley's bonds were the widest, others in the sector also saw their paper suffer.

Bank of America Corp. debt was generically 25 bps worse, while Goldman Sachs Group, Inc. bonds went out by 20 bps overall.

JPMorgan Chase & Co. debt was about 10 bps wider, he said.

Viacom, ERP improve

Two of Wednesday's bond sales showed improvement in next-day trading, secondary sources said.

The $1 billion of ERP Operating 4.625% notes due 2021 were trading at 258 bps bid, 257 bps offered. They were priced at 265 bps over Treasuries.

Viacom's new five- and 10-year notes didn't tighten quite as much. The 2.5% notes due 2015 were unchanged from the pricing level of 175 bps on the bid side and offered at 173 bps, a trader said.

The 3.875% notes due 2021 fared better after pricing at 205 bps over Treasuries. The notes were quoted at 203 bps bid, 199 bps offered, which was a 2 to 4 bps gain from where they were trading on Wednesday.

Goldman among most active

The most active bonds in the high-grade secondary were from a mix of sectors as of early afternoon, a source said.

Goldman Sachs had two active outstanding bonds. Its 5.45% debt due 2012 was at the top of trading volume, quoted at 102.116 with a spread of 286 bps. The debt was originally sold in October 2007 at 110 bps and was reopened in February 2008 with a price of 104.391.

Goldman Sachs' 5.7% debt due Sept. 1, 2012 was also popular with investors and quoted at 101.78 with a spread of 305 bps.

Hewlett-Packard Co. saw its 4.5% notes due March 1, 2013 trading actively at 103.198 to yield 165 bps over Treasuries. The debt originally priced in February 2008 at 157 bps.

A 2% note from Verizon Communications Inc. due in November 2016 was actively trading at 99.902 with a spread of 121 bps. BHP Billiton Finance Ltd. also saw its 3.25% notes due in Nov. 2021 trade at high volume at 101.453 to yield 119 bps over Treasuries.

© 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.