First American Financial sells 10-year issue; EDF prices hybrids; PNC, banks mixed in trading

By Aleesia Forni and Andrea Heisinger

New York, Jan. 24 - First American Financial Corp. was in the high-grade bond market on Thursday, selling bonds for the first time after pulling an offering in 2011. The company sold $250 million of 10-year senior notes.

A $3 billion sale of perpetual hybrid subordinated notes that went overnight from Wednesday was priced by Electricite de France SA. The notes sold tighter than guidance, a source said.

"It took a lot of the attention," a preferred stock market source said of the EDF deal.

He quoted the $1,000-par issue at 99.375 bid, 99.625 offered, which was up 20 basis points from the discounted original sale price. "So obviously it's done well."

Elsewhere in the preferred stock market, First Horizon National Corp. sold $100 million of 6.2% series A noncumulative perpetual preferreds.

Issuers were scarcer than expected on the day following Wednesday's light load and the virtual absence of sales on Tuesday after the long holiday weekend due to Martin Luther King Jr. Day.

"I thought today was a key day, but I guess not," one source said. "There were obviously a lot of people ... wanting to buy IG bonds out there." The source was referring to the large oversubscription on the day's main trade, First American Financial.

Those looking back at the market for the day said there was little cause for issuers to stay on the sidelines, other than perhaps restrictions surrounding earnings announcements.

"I don't know, to be honest," a syndicate source who worked on one of the day's trades said of the lack of offerings.

The Markit CDX Series 18 North American Investment Grade index widened 1 bp to a spread of 87 bps.

The secondary market saw Wednesday's issuance from PNC Bank NA trade flat to wider on Thursday, a market source said.

In other bank names, Goldman Sachs Group, Inc.'s 6.15% bond due 2018 and Merrill Lynch's 6.875% notes due 2018 firmed on the day.

Bank of America Corp.'s 7.375% notes due 2014 closed the session 3 bps wider.

Investment-grade bank and brokerage credit default swap costs were mixed on Thursday.

Bank of America's CDS costs firmed 1 bp to 112 bps bid, 115 bps offered. Citi's CDS costs were 2 bps tighter at 110 bps bid, 113 bps offered. JPMorgan's CDS costs widened 1 bp to 81 bps bid, 84 bps offered. Wells Fargo's CDS costs also rose 1 bp to 72 bps bid, 75 bps offered.

Merrill Lynch's CDS costs were 1 bp tighter at 113 bps bid, 118 bps offered. Morgan Stanley's CDS costs declined 2 bps to 143 bps bid, 147 bps offered. Goldman Sachs' CDS costs firmed 4 bps to 133 bps bid, 136 bps offered.

First American does first trade

First American Financial priced $250 million of 4.3% 10-year senior notes (Baa3//BBB-) to yield 250 bps over Treasuries, a source close to the trade said.

The bonds were sold tighter than initial guidance in the low 300 bps area, the source said, and at the tight end of revised talk in the 262.5 bps area, plus or minus 12.5 bps.

There was about $3.5 billion on the books at the height of the sale, with roughly $700 million in drops as the spread went tighter from initial guidance, the source said.

"Not too bad for a name people weren't really familiar with, with no outstandings," the source added.

It was the first bond sale for First American, which had announced a $400 million offering of 10-year senior notes on May 24, 2011 but postponed the trade on May 27, 2011.

The active bookrunners were J.P. Morgan Securities LLC and Wells Fargo Securities LLC.

Proceeds are being used to repay borrowings under an outstanding revolving credit facility and for general corporate purposes.

The financial services, title insurance and settlement company is based in Santa Ana, Calif.

EDF sells hybrids

Electricite de France priced a $3 billion offering of 5.25% perpetual hybrid subordinated notes (Aa3/A+/A+) to yield 5.375%, an informed source told Prospect News.

The sale was announced at a benchmark size on Wednesday and went overnight.

Pricing was at 99.043 with a spread of Treasuries plus 351 bps.

The notes have a coupon that will reset every 10 years. There is a fixed rate of 5.25% prior to the first call opportunity on Jan. 29, 2023 and then 3.709% from and including the first reset date to Jan. 29, 2043 and 4.459% from and including the 2043 step-up date.

Price talk early Wednesday was in the high 5% area, a source said, with the deal selling tighter than that guidance.

Pricing was done under Rule 144A and Regulation S.

The global coordinators were HSBC Securities (USA) Inc., Citigroup Global Markets Inc. and BNP Paribas Securities Corp.

The active bookrunners were Bank of America Merrill Lynch, Credit Suisse Securities (USA) LLC, Goldman Sachs and Nomura Securities International Inc.

EDF priced a similar euro-denominated offering of notes on Tuesday.

The main electricity generation and distribution company in France is based in Paris.

First Horizon's preferreds

First Horizon National priced $100 million of 6.2% series A noncumulative perpetual preferred stock.

The yield was expected around 6.25%, according to a trader.

The trader saw a $24.72 bid for the paper in the gray market at midday.

JPMorgan, Citigroup and Goldman Sachs were the joint bookrunning managers.

First Horizon intends to list the new series of preferreds on the New York Stock Exchange under the ticker symbol "FHNPA."

Proceeds will be used for general corporate purposes.

First Horizon National is a Memphis-based bank holding company.

PNC notes mixed

PNC Bank's $750 million of 0.8% three-year senior bank notes traded flat at 45 bps bid, 43 bps offered following Wednesday's sale at a spread of Treasuries plus 45 bps, a trader said.

The $750 million tranche of 2.95% 10-year subordinated notes traded 3 bps wider at 120 bps bid, 117 bps offered, he added. The notes were sold with a spread of 117 bps over Treasuries.

The $1.75 billion sale also included $250 million of three-year floating-rate senior bank notes, which were sold at par to yield Libor plus 31 bps.

The subsidiary of PNC Financial Services Group is based in Pittsburgh.

Goldman Sachs firms

Meanwhile, Goldman Sachs' bond due 2018 tightened 4 bps to 178 bps bid on the day.

The bank priced $1.5 billion of the 6.15% 10-year bonds in April 2008 at Treasuries plus 237.5 bps.

Merrill Lynch tightens

The secondary also saw Merrill Lynch's 6.875% notes due 2018 firm 1 bp to 182 bps bid near the end of the session.

On April 22, 2008, the bank priced $5.5 billion of the 10-year notes at 320 bps over Treasuries.

Bank of America tightens

In other trading, Bank of America's 7.375% notes due 2014 weakened 3 bps to 88 bps bid late Thursday.

The bank priced $3 billion of the notes due 2014 at Treasuries plus 537.5 bps on May 8, 2009.

Stephanie N. Rotondo contributed to this review

© 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.