Cox, JPMorgan, Citigroup price in packed primary; new issues see continued demand in secondary

By Aleesia Forni and Andrea Heisinger

New York, April 24 - Corporate issuance heated up in Wednesday's high-grade bond market with Diageo Capital plc, JPMorgan Chase & Co., Citigroup Inc. and Cox Communications Inc. among the sellers.

More than $15 billion of high-grade bonds have already been priced this week. That already meets the upper estimate of $10 billion to $15 billion of supply.

London-based seller of alcoholic beverages Diageo added to the total, pricing $3.4 billion in four maturities on Wednesday.

The company last tapped the U.S. bond market in May of 2012.

JPMorgan sold $2 billion of 10-year subordinated notes and was joined by Citigroup, which priced $1.35 billion of five-year paper.

The Citigroup sale was roughly two times oversubscribed with about $2.7 billion on the books, a market source said.

The notes were seen trading 1 basis point tighter in the gray market, while another source quoted the notes at 3 bps better in the secondary near the end of the session.

Cox priced $1.5 billion of notes due 2023 and 2043 under Rule 144A and Regulation S.

The notes were trading 3 bps to 5 bps better near the day's close.

Another private sale came from Australia's QBE Insurance Group Ltd. The company sold $600 million of five-year notes.

Norway's Sparebank 1 Boligkreditt priced $1 billion of five-year covered bonds in a private sale.

Germany's KfW sold $1 billion of notes due 2014 early in the day.

Svensk Exportkredit AB (Swedish Export Credit Corp.) reopened an issue of floating-rate notes due 2017 to add $200 million.

Meanwhile, Air Canada sold $714.534 billion of enhanced equipment trust certificates in three tranches. The size was increased after a third class of certificates was added.

"Kind of a big day out there," one source said. "Nothing came close to the demand we saw for Nike yesterday."

Athletic apparel company Nike, Inc. priced $1 billion of notes in two maturities, garnering $9 billion of investor interest.

"Financials could keep rolling out tomorrow, although I don't think we'll see quite as much," the source said.

In the preferred stock market, BB&T Corp. priced an upsized $450 million of noncumulative perpetual shares. The size was initially $200 million.

A trader quoted the issue at $24.75 bid, $24.77 in the midday gray market, noting that paper was trading up to the offered side.

After pricing, a trader said trading in the paper was "a little sloppy," though he expected it would do well.

He pegged the preferreds around $24.80. Another market source quoted the issue at $24.80 bid, $24.85 offered.

"That's a big chunk of change for somebody their size," the source said of the amount of shares sold. "They certainly slammed the market."

In other trading of preferreds, CYS Investments Inc.'s $200 million of 7.5% series B cumulative redeemable preferreds freed up after pricingin the previous session. A trader placed that issue at $24.75 bid.

Citigroup's newly priced $1.25 billion issue of 5.35% $1,000-par series D fixed-to-floating rate noncumulative perpetual preferreds freed to trade on Wednesday after pricing Tuesday.

After the close, a trader said the paper had traded "around par all day long."

And, Teekay Offshore Partners LP's $150 million of 7.25% series A cumulative redeemable preferreds were "moving on up," a trader said. He saw a trade at $25.20 around midday, but added that there was a $25.10 bid earlier in the day. He speculated the market was closer to the $25.10 mark.

The Markit CDX North American Investment Grade index was 1 bps tighter at a spread of bps on Wednesday.

Investment-grade bank and broker credit default swap costs were mostly wider on the day, according to a market source.

Bank of America Corp.'s CDS costs were 1 bp wider at 121 bps bid, 125 bps offered. Citigroup Inc.'s CDS costs widened 1 bp to 103 bps bid, 107 bps offered. JPMorgan Chase & Co.'s CDS costs were 2 bps wider at 86 bps bid, 90 bps offered. Wells Fargo & Co.'s CDS costs rose 1 bp to 70 bps bid, 74 bps offered.

Merrill Lynch's CDS costs were unchanged at 111 bps bid, 116 bps offered. Morgan Stanley's CDS costs rose 2 bps to 142 bps bid, 146 bps offered. Goldman Sachs Group, Inc.'s CDS costs were flat at 125 bps bid, 129 bps offered.

Cox prices tight

Cox Communications was in the day's session with a $1.5 billion sale of bonds (Baa2/BBB/BBB+) in two tranches, a source away from the sale said.

A $1 billion tranche of 2.95% 10-year notes priced at a spread of Treasuries plus 130 bps. Guidance was in the 130 bps to 135 bps range.

One market source saw the notes trading 5 bps better at 125 bps bid 121 bps offered near the end of Wednesday's session.

There was also $500 million of 4.5% 30-year bonds sold at 160 bps over Treasuries. The tranche was talked in the 160 bps to 165 bps range.

The source quoted the notes 3 bps tighter at 157 bps bid, 152 bps offered.

Pricing was done under Rule 144A and Regulation S.

Bookrunners were J.P. Morgan Securities LLC and Wells Fargo Securities LLC.

Proceeds will be used to fund a dividend and for debt repayment.

Cox was last in the market with a $1.5 billion offering of senior notes in two parts on Nov. 26, 2012. That sale included a 3.25% 10-year note priced at 160 basis points over Treasuries along with a 4.7% 30-year bond priced at 190 bps over Treasuries.

The provider of phone, internet and TV service is based in Atlanta.

Diageo's four-parter

Diageo Capital priced $3.4 billion of notes (A3/A-/) in four tranches, a market source said.

A $750 million tranche of 0.625% three-year notes sold at a spread of Treasuries plus 35 bps.

There was $650 million of 1.125% five-year notes priced at 55 bps over Treasuries.

The third part was $1.35 billion of 2.625% 10-year notes sold at a spread of 95 bps over Treasuries.

Finally, there was $650 million of 3.875% 30-year bonds priced at Treasuries plus 105 bps.

Active bookrunners were Barclays, BofA Merrill Lynch, Goldman Sachs & Co., J.P. Morgan Securities LLC and UBS Securities LLC.

Proceeds are being used for general corporate purposes, including repayment of maturing long-term debt and commercial paper.

The offering is guaranteed by Diageo plc.

The London-based alcoholic drinks company was last in the U.S. bond market with a $2.5 billion sale in three tranches on May 8, 2012. The sale included a 1.5% five-year note sold at 82 basis points over Treasuries, a 2.875% 10-year tranche priced at 107 bps over Treasuries and a 4.25% 30-year bond offered at 125 bps over Treasuries.

Citi sells $1.35 billion

Citigroup hit the market with a $1.35 billion sale of 1.75% five-year notes priced at Treasuries plus 108 bps, a source close to the trade said.

Guidance was in the 110 bps area, plus or minus 2 bps.

One trader saw the notes at 107 bps bid, 103 bps offered in the gray market during Wednesday's session.

Later during the day's trading, a market source at another desk saw the notes firm 3 bps to 105 bps bid, 100 bps offered.

Bookrunner was Citigroup Global Markets LLC.

The financial services company is based in New York City.

JPMorgan does 10-years

JPMorgan Chase tapped the market for $2 billion of 3.375% 10-year subordinated notes (A3/A-/A) to yield 175 bps over Treasuries, a source away from the trade said.

J.P. Morgan Securities LLC was bookrunner.

Proceeds will be used for general corporate purposes

The New York City-based financial services company last priced a 10-year maturity as part of a $6 billion sale on Jan. 17, with a coupon of 3.2% and spread of 133 basis points over Treasuries.

QBE's five-years

QBE Insurance Group sold $600 million of 2.4% five-year notes (Baa1/A/A-) under Rule 144A and Regulation S, an informed source said.

Pricing was at a spread of Treasuries plus 175 bps.

Barclays and Morgan Stanley & Co. LLC were bookrunners.

The general insurance company is based in Sydney.

Sparebank's covered deal

Sparebank 1 Boligkreditt was in the market with a $1 billion sale of 1.25% five-year covered bonds (Aaa//AAA) sold at 50 bps over mid-swaps, or Treasuries plus 67.25 bps, a source said on Wednesday.

The sale was done under Rule 144A and Regulation S.

Bookrunners were BNP Paribas Securities Corp., Barclays, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC.

The bank is based in Stavanger, Norway.

KfW's $1 billion

KfW was in the day's session with a $1 billion sale of 0.283% notes due 2014 (Aaa/AAA/) priced at par to yield 0.283%, a market source said.

Pricing was at a spread of mid-swaps minus 5 bps.

Bookrunners were Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC.

Pricing was expected late on Wednesday.

The German government-owned development bank is based in Frankfurt.

SEK's reopening

Svensk Exportkredit AB (Swedish Export Credit Corp.) reopened is issue of floating-rate notes due Nov. 9, 2017 to add $200 million, a market source said.

The notes have a coupon of Libor plus 37.5 bps with a price of 100.706 to yield Libor plus 22 bps.

Total issuance will be $700 million including $500 million previously sold.

Bookrunners were BofA Merrill Lynch and Credit Suisse Securities (USA) LLC.

Based in Stockholm, Svensk is the lender to Sweden's export industry.

Air Canada's trade

Air Canada was in the day's session with an upsized $714.534 million trade of enhanced equipment pass-through trust certificates in three tranches, according to a press release.

The size was increased from $606.27 million in two parts after an additional class of certificates was added.

There was $424.389 million of 4.125% class A certificates with a final expected distribution on May 15, 2025.

The second part was $181.881 million of 5.375% class B certificates with an expected distribution on May 15, 2021.

Finally, there was $108.264 million of 6.625% class C certificates with an expected distribution of May 15, 2018.

Pricing was done under Rule 144A and Regulation S.

Proceeds will be used by two pass-through trusts to acquire equipment notes used to finance the acquisition of five new Boeing aircraft scheduled for delivery from June 2013 to Feb. 2014.

The commercial airline is based in Montreal.

BB&T's preferreds

BB&T priced an upsized $450 million of 5.2% series G noncumulative perpetual preferreds, according to a prospectus filed with the Securities and Exchange Commission.

The preferreds will be issued as depositary shares representing a 1/1,000th interest.

Price talk was around 5.25%, a trader said.

BofA Merrill Lynch, BB&T Capital Markets, Deutsche Bank Securities Inc., Morgan Stanley & Co. Inc., UBS Securities LLC and Wells Fargo Securities LLC are the joint bookrunning managers.

The Winston-Salem, N.C.-based financial institution intends to list the new securities on the New York Stock Exchange under the ticker symbol "BBTPG."

Proceeds will be used for general corporate purposes, which may include acquisitions, common stock repurchases, debt repayments and extending credit to or funding investments in subsidiaries.

Stephanie N. Rotondo contributed to this review

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