Fulton Financial prices two tranches; supply thin amid pandemic fears; CPPIB offers notes

By Cristal Cody

Tupelo, Miss., Feb. 25 – Fulton Financial Corp. priced an upsized $375 million of fixed-to-floating rate subordinated notes in two tranches on Monday as the sole reported issuer in the primary market.

The deal is the only reported high-grade issue to price week to date as issuers pull back from the primary market on concerns of a coronavirus pandemic.

Coming up on Wednesday, CPPIB Capital Inc. is expected to bring a $1 billion Rule 144A and Regulation S offering of five-year notes.

About $25 billion to $30 billion of investment-grade deal volume was expected this week.

The Markit CDX North American Investment Grade 33 index eased another 3 basis points on Tuesday to a spread of 55.58 bps after softening about 6 bps on Monday.

As the coronavirus spreads outside China, “longer maturity IG corporate yields have reached new record lows, which is obviously negative for credit spreads,” according to a BofA Securities research note released on Tuesday.

Following Monday’s weakness, investment-grade credit spreads are at the wides of the year, the report noted.

“Equities appear to be pricing to the baseline scenario whereas Treasuries price more to fears,” the report said. “Given the yield-sensitivity of IG credit, that makes spreads priced somewhere in between.”

Stocks plunged on Monday and remained weak over Tuesday’s session.

The Dow Jones Industrial Average fell another 3.15% after closing down 3.56% on Monday.

Treasuries continued to rally in a flight-to-safety bid with the 10- and 30-year benchmarks hitting all-time yield lows.

On Tuesday, the 10-year benchmark reached its lowest yield ever at 1.307% before ending the session down 4.5 bps at 1.332%.

Meanwhile, several high-grade companies have wrapped recent fixed income investor calls for possible bond deals, sources said.

Gaming and Leisure Properties, Inc. (Ba1/BBB-/BBB-) held fixed income investor calls on Monday for a possible transaction. BofA Securities, Inc., J.P. Morgan Securities LLC, Fifth Third Securities, Inc. and Wells Fargo Securities LLC were the arrangers.

Mid-America Apartment Communities, Inc. (Baa1/BBB+/BBB+) held investor calls on Friday. J.P. Morgan, U.S. Bancorp Investments, Inc. and Wells Fargo were the arrangers.

Healthcare Realty Trust Inc. (Baa2/BBB/BBB) also held fixed income investor calls on Friday for a possible note offering via Jefferies LLC and U.S. Bancorp.

In addition, a possible transaction is being eyed from Piedmont Office Realty Trust, Inc. (Baa2/BBB/) after the company held fixed income investor calls on Thursday. BofA Securities, J.P. Morgan, SunTrust Robinson Humphrey Inc. and U.S. Bancorp were the arrangers.

Fulton Financial prices

Fulton Financial priced an upsized $375 million of fixed-to-floating rate subordinated notes (Baa1//DBRS: BBB) in two parts on Monday, according to FWP filings with the Securities and Exchange Commission.

A $200 million tranche of fixed-to-floating rate notes due March 15, 2030 priced at par to yield 3.25%.

The rate on the notes will reset March 15, 2025 to a floating rate of SOFR plus 230 bps.

Fulton Financial sold $175 million of 15-year fixed-to-floating rate notes at par to yield 3.75%.

The rate will reset on March 15, 2030 to a floating rate of SOFR plus 270 bps.

The deal was upsized from $250 million.

Piper Sandler & Co. was the active bookrunner. Keefe, Bruyette & Woods Inc. was passive.

Fulton Financial is a financial holding company for regional banks based in Lancaster, Pa.

CPPIB in deal pipeline

Coming up on Wednesday, primary action is expected from CPPIB Capital (Aaa/AAA/AAA), according to a market source.

The company is offering $1 billion of five-year notes initially talked to price at the mid-swaps plus 16 bps area.

Barclays, Goldman Sachs & Co. LLC, J.P. Morgan and RBC Capital Markets LLC are the bookrunners of the Rule 144A and Regulation S deal.

CPPIB Capital is a Toronto-based investment management company for the Canada Pension Plan Investment Board.

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