State Street, Capital One, Barclays, Verizon, PPL Electric sell bonds; new deals mostly firm

By Andrea Heisinger and Paul Deckelman

New York, May 19 - The new deal market quieted some Tuesday, and was monopolized by financial issues, including deals - all without government backing - from State Street Corp., Capital One Financial Corp. and Barclays Bank plc.

On the non-financial side, Cellco Partnership d/b/a Verizon Wireless Capital LLC and PPL Electric Utilities Corp. completed sales.

Two of the three financial issues are intended to be used for paying back the U.S. Treasury by repurchasing preferred stock and warrants, according to the use of proceeds listed in prospectuses.

In the secondary arena on Tuesday, a market source said the CDX Series 12 North American high-grade index narrowed by 4 basis points to a mid bid-asked spread level of 145 bps.

Advancing issues regained their lead over decliners, by a ratio of eight to seven.

Overall market activity, reflected in dollar volumes, jumped by 42% from Monday's levels.

Spreads in general were seen little changed, in line with steady Treasury yields; for instance, the yield on the benchmark 10-year issue was unchanged at 3.24%.

New issues continued to dominate in the secondary, which saw the new bonds generally doing well in the aftermarket, including such financial issues as Capital One Financial Corp. and Barclays Bank, as well as non-financial names such as Tuesday's PPL Electric Utilities offering and Monday's big three-part mega-deal from ConocoPhillips Co.

A trader who follows financial issues said that the new deals "were the focus all day" in his market.

Cellco/Verizon does private sale

Cellco Partnership d/b/a Verizon Wireless sold $4 billion of two-year notes in both floating- and fixed-rate tranches.

The $1.25 billion of two-year floaters priced at par to yield three-month Libor plus 260 bps.

A second tranche was $2.75 billion of 3.75% two-year notes priced at 290 bps over Treasuries.

The deal was done via Rule 144A.

Citigroup Global Markets, Goldman Sachs & Co. and UBS Investment Bank were bookrunners.

Barclays sells $2 billion

London-based financial services company Barclays Bank priced $2 billion of 6.75% 10-year notes at 355 bps over Treasuries.

The deal is not guaranteed by the United Kingdom or U.S. Treasury.

Barclays Capital ran the books.

Capital One prices five-year notes

Capital One Financial priced a $1 billion offering of five-year senior notes at Treasuries plus 540 bps late Tuesday.

This was tighter than price guidance of 550 to 562.5 bps, a source close to the sale said.

The notes were priced without the guarantee of the FDIC.

Capital One will use proceeds for purposes including the possible repurchase of preferred stock and warrants issued and sold to the U.S. Department of the Treasury as part of the TARP Capital Purchase Program.

The bank holding company tapped Credit Suisse Securities, J.P. Morgan Securities and RBS Securities as bookrunners.

It is based in McLean, Va.

State Street sells non-FDIC deal

Boston-based financial services company State Street priced $500 million of 4.3% five-year senior notes without the FDIC guarantee early Tuesday. The sale had been announced Monday, along with a concurrent common stock share sale.

The notes priced at Treasuries plus 220 bps.

Proceeds are being used to repurchase preferred and common stock warrants from the U.S. Department of the Treasury which were issued under the TARP Capital Purchase Program.

Goldman Sachs & Co. and Morgan Stanley & Co. ran the offering.

PPL Electric prices mortgage bonds

PPL Electric Utilities priced $300 million of 6.25% 30-year first mortgage bonds in a quick deal. The sale was announced late, and priced early in the afternoon, a source close to it said.

It sold at a spread of 210 bps over Treasuries.

Proceeds are going to partially fund the repayment of $486 million of outstanding senior bonds due Aug. 15.

Banc of America Securities, Credit Suisse Securities, Morgan Stanley and UBS Investment Bank were tapped as bookrunners by the electric company based in Allentown, Pa.

Primary slowdown begins

Sources said late Tuesday that issuance should slow further on Wednesday and for the rest of the week, heading into the long holiday.

"I think we should see a couple more tomorrow, but that's about it," a syndicate source said.

"We don't have much set on our calendar but there may be some away."

Another market source said there's "not a lot set in stone," for the remainder of the week, but that there may be a company or two that still needs to issue before the long weekend.

Market tone remained good Tuesday as many of Monday's sales traded tighter in the secondary, the source said.

"I think spreads are definitely good now," he said. "A lot of it is investor-driven."

There has been high investor interest in nearly all high-grade new issues, leaving them oversubscribed.

On the spread side, some were even below the tight end of price talk, such as the Capital One Financial sale.

A sense of optimism has been seen in the primary in recent weeks as issuers make their way back to the market after an earnings-induced lull that was coupled with the bank stress tests.

"It's kind of a relief," the market source said, referring to the return to a busy calendar. But added: "Who knows how long it will last."

Day's bank deals seen firmer

When Capital One's 7.375% notes due 2014 were freed for secondary dealings, a trader saw those bonds as having firmed smartly to a spread over comparable Treasuries of 505 bps bid, 495 bps offered. That was in solidly from the 540 bps over level at which the company had priced its $1 billion issue earlier to yield 7.494%.

He also saw Barclays Capital's new 6.75% notes due 2019 as having come in to 345 bps bid, 340 bps offered. The British bank's $2 billion issue had earlier priced at 355 bps over to yield 6.78%.

And he saw State Street's new 4.3% notes due 2014, which were sold without FDIC guarantees, at 210 bps bid, with no offered levels. The company's $500 million offering had earlier priced at 220 bps over

Aflac improves

The trader also saw Monday's upsized $850 million offering for insurer Aflac Inc. trading at a spread of 470 bps. That was well in from the 530 bps over level at which those bonds had priced to yield 8½%.

Citigroup settles in firmer

And going back a little further, he saw Friday's Citigroup 8½% non-FDIC notes due 2019 trading at 510 bps bid, 505 bps offered. The New York banking giant's $2 billion offering had originally priced at 562.5 bps over to yield 8.765%.

At another desk, a market source saw those Citi bonds at 515 bps bid, 510 bps offered.

ConcoPhillips moves up

Another trader saw Conoco Phillips' new bonds having firmed. The big energy company's $1 billion of 6% notes due 2020 were trading at 258 bps bid, 255 bps offered - well in from the 285 bps over level at which the bonds had priced to yield 6.095% on Monday.

He also saw the company's 6.50% bonds due 2039 at 270 bps bid, 260 bps offered. That $500 million of bonds had priced at 287.5 bps over.

PPL Electric bonds firmer

PPL Electric Utilities 6.25% bonds due 2039 traded at 203 bps bid, 197 bps offered. Earlier Tuesday, the $300 million issue priced at 210 bps over.

Bank, broker CDS costs lower

In the credit-default swaps market, a trader said that CDS costs to protect holders of big-bank paper against a possible default, as well as investment bank CDS costs, were 10 bps to 20 bps tighter across the board.

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