Citi remarkets notes as Iceland preps deal, KfW sells floaters; Nokia bonds widen on ratings

By Andrea Heisinger and Cristal Cody

New York, June 8 - Citigroup Inc. remarketed some notes on Wednesday as other issuers declined to tap the high-grade debt market.

The financial services company remarketed junior subordinated notes as $1.875 billion of five-year senior notes. They priced at the tight end of guidance.

There was also a quasi-sovereign sale from KfW. The development bank sold $1.25 billion of two-year floating-rate notes.

The Republic of Iceland announced a sale of five-year notes - its first in several years. They will be priced on Thursday or Friday.

In the preferred stock market, PartnerRe Ltd. sold $325 million of 7.25% perpetual cumulative redeemable shares at $25.

There weren't any particular reasons why more issuers didn't tap the primary Wednesday, sources said.

"At the end of yesterday we weren't seeing much," one market source said.

"I don't think anyone had anything ready [to price]."

There was continuing volatility coming from Greece as the country pushes for austerity measures, but it didn't seem to have an impact on anyone deciding not to price high-grade bonds for the day, a syndicate source said.

Overall trading volume rose about 10% to nearly $14.5 billion on Wednesday.

Nokia Corp.'s downgrade by Fitch Ratings sent its bonds into a tailspin.

"Those bonds traded as much as 70 wider yesterday. Today, they're closing the day 10 basis points wider," the trader said.

The new bonds brought by NextEra Energy Capital Holdings Inc. stayed weaker in the secondary market. Also in trading, Atmos Energy Corp.'s bonds were flat after tightening initially on pricing the previous day.

Spectra Energy Partners, LP's senior notes stayed mostly flat in trading.

"It's been relatively light, spreads are generically 2 to 3 wider," a trader said.

Treasuries closed higher sending yields down 5 bps to 6 bps on the longer portion of the curve. The benchmark 10-year Treasury note yield fell to 2.94% from 2.99%.

Citi remarkets notes

Citigroup priced $1.875 billion of 3.953% five-year notes in a remarketing of junior subordinated debentures, an informed source said.

The notes (A3/A/A+) were priced at a spread of Treasuries plus 200 bps.

The paper priced at the tight end of both whispered guidance in the low 200 bps area, and revised talk in the 205 bps area.

"We brought them right on top of secondaries," the informed source said.

The original issue was 6.935% junior subordinated deferrable interest debentures due on Sept. 15, 2042 to Citigroup Capital XXXII.

Citigroup Global Markets Inc. is the remarketing agent.

Citi said the offering was the last of four series of debt securities required to be remarketed under the terms of Citi's Upper DECS Equity Units issued to the Abu Dhabi Investment Authority in December 2007.

The financial services company is based in New York City.

KfW offers floaters

Germany's KfW sold $1.25 billion of two-year floating-rate global notes (Aaa/AAA/AAA) at par to yield one-month Libor plus 1 bp, according to an FWP filing with the Securities and Exchange Commission.

Bookrunners were BNP Paribas Securities Corp. and Deutsche Bank Securities Inc.

The development bank is based in Frankfurt.

Iceland preps five-year sale

The Republic of Iceland is doing a benchmark deal of five-year notes, market sources said.

The sovereign has not sold bonds for "several years," one syndicate source said.

The notes (Baa3/BBB-) were being talked in the mid-swaps plus 325 bps area. Pricing is expected on Thursday or Friday, the source said.

Barclays Capital Inc., Citigroup Global Markets Inc. and UBS Securities LLC were bookrunners.

The issuer is based in Reykjavik.

PartnerRe prices preferreds

PartnerRe issued $325 million of 7.25% series E perpetual cumulative redeemable preferred stock (Baa1/BBB+/BBB+), according to an FWP filing with the Securities and Exchange Commission on Wednesday.

The deal was upsized from $150 million. There is a $48.75 million over-allotment option.

Liquidation preference is $25 per share.

Merrill Lynch, Pierce, Fenner & Smith Inc., UBS Securities LLC and Wells Fargo Securities LLC are the joint bookrunners.

Proceeds will be used for general corporate purposes.

PartnerRe is a Pembroke, Bermuda-based reinsurance company.

Nokia moves out

Fitch downgraded Nokia by two notches to just above high-yield at BBB- from BBB+ previously on Tuesday.

Nokia's bonds moved out in trading on the news and continued to widen on Wednesday.

The 5.375% notes due 2019 traded 10 bps wider on Wednesday at 165 bps bid, 155 bps offered, a trader said.

The company's 6.625% bonds due 2039 also widened 5 bps to 290 bps bid, 280 bps offered. That's on top of "closing 45 [bps] wider yesterday," the trader said.

"Before yesterday, they weren't all that active. Now both the '19s and '39s are pretty active."

Fitch said the downgrade and the negative outlook reflect the rating agency's concerns about what it said was the accelerating pace of market share erosion for Nokia's Symbian handset business.

The mobile phone manufacturer and internet services provider is based in Espoo, Finland.

Atmos Energy flat

Atmos Energy's new bonds were back to near their issue level in trading on Wednesday.

The company priced an upsized $400 million of 5.5% 30-year senior bonds (Baa1/BBB+/A-) at a spread of Treasuries plus 125 bps on Tuesday.

The bonds were seen going out Tuesday at 119 bps bid, 123 bps offered.

"First thing this morning, 124, 121," a trader said on Wednesday. The bonds were quoted Wednesday afternoon at 125 bps bid, 122 bps offered.

The natural gas distribution, transmission and storage company is based in Dallas.

NextEra weaker

NextEra Energy Capital Holdings' new bonds stayed weaker in secondary trading, a trader said Wednesday.

The company sold an upsized $400 million of 4.5% 10-year debentures (Baa1/A-) to yield Treasuries plus 148 bps on Tuesday.

The notes due 2021 were last seen trading at 156 bps bid, 153 bps offered.

The issuer provides electric service through its utility subsidiaries and is based in Juno Beach, Fla.

Spectra stronger

Spectra Energy's new bond deal from Tuesday was mostly flat in the secondary market on Wednesday, according to a trader.

A $250 million tranche of 2.95% notes due 2016, which priced at a spread of Treasuries plus 140 bps and narrowed to 137 bps bid, 132 bps offered that same day, traded unchanged at 137, 132 on Wednesday.

The $250 million tranche of 4.6% notes due 2021 priced at a spread of Treasuries plus 160 bps and firmed that afternoon by about 5 bps. In trading on Wednesday, the notes were seen at 160 bps bid, 155 bps offered.

The natural gas pipeline gathering and transportation company is based in Houston.

Bank, broker CDS weaker

A trader who follows the credit-default swaps market said that the cost of protecting holders of big-bank paper against a possible event of default widened 8 bps to 6 bps.

The CDS costs for holders of bonds issued by large investment banking companies likewise also widened 7 bps to 2 bps.

Stephanie N. Rotondo contributed to this review

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