Citi brings FDIC notes, BofA, Morgan Stanley go it alone; primary stays busy; spreads widen

By Andrea Heisinger and Paul Deckelman

New York, May 28 - A short week made for a busy Thursday as a mix of financial and industrial names sold bonds. Those included reopenings from CBS Corp. and Morgan Stanley, a multi-tranche sale from Citigroup Inc. backed by the Federal Deposit Insurance Corp., an issue from Bank of America Corp. done without the FDIC guarantee and other sales from Travelers Cos., Inc. and Public Service Co. of Colorado.

Pride International, Inc. sold a split-rated issue of bonds with a greater interest from the high-yield side despite being run off the investment-grade desk.

A slowdown is not likely to happen anytime soon, a source said, despite the usually slow coming summer months.

In the secondary arena on Thursday, a market source said the CDX Series 12 North American high-grade index tightened by 3 basis points to a mid bid-asked spread level of 144 bps.

Advancing issues overtook decliners, by an eight-to-seven ratio.

Overall market activity, reflected in dollar volumes, fell by 20% from Wednesday's levels.

Spreads in general were seen wider, in line with lower Treasury yields; for instance, the yield on the benchmark government 10-year note shrank 12 bps to 3.61%.

Morgan Stanley adds $1.5 billion in reopening

Bank holding and financial services company Morgan Stanley reopened two tranches of senior notes without the backing of the FDIC to add a total of $1.5 billion.

It added $500 million to the 6% five-year notes at a spread of Treasuries plus 360 bps. An issue of 7.3% 10-year notes was reopened to add $1 billion priced at 360 bps over Treasuries.

Both tranches were talked in the 350 bps area, a source said, and they each priced at the wide end of that.

Total issuance for the five-year notes is $2.5 billion including $2 billion priced May 8 at Treasuries plus 390 bps. The 10-year notes total $3 billion including $2 billion priced May 8 at 400 bps over Treasuries.

Morgan Stanley ran the books.

Citigroup sells $5 billion FDIC notes

Citigroup sold $5 billion of notes (Aaa/AAA/AAA) in four tranches late Thursday with the guarantee of the Federal Deposit Insurance Corp., a source said.

The $1.4 billion of 1.25% two-year notes priced at Treasuries plus 38.4 bps, while the $1.3 billion of 1.875% three-year notes priced at Treasuries plus 48 bps.

A $1.1 billion tranche of two-year floating-rate notes priced at par to yield three-month Libor minus 5 bps.

The final tranche was $1.2 billion of three-year floaters priced at par to yield three-month Libor minus 3 bps.

Bookrunner was Citigroup Global Markets.

The bank holding and financial services company is based in New York City.

A syndicate source away from the sale said there was some surprise at the choice to do the deal under the FDIC umbrella.

"Yeah, it was a little weird, but I'm sure they had their reasons," he said. "Haven't seen one [FDIC-backed sale] for a while."

Many of the bank holding companies have shifted back to the non-FDIC deals in an effort to pay back money to the U.S. Department of the Treasury.

Bank of America also sold non-FDIC notes Thursday, although in a single tranche that was half the size of the Citigroup deal.

CBS reopens 10-year

CBS reopened an issue of 8.875% 10-year senior notes early Thursday to add $250 million. They were priced to yield 9.25%, with a spread of Treasuries plus 558.6 bps.

Total issuance is $600 million including $350 million issued May 13 to yield 9.25%.

Banc of America Securities, Citigroup Global Markets, J.P. Morgan Securities and UBS Investment Bank were bookrunners for the issue from the media company based in New York City.

Public Service of Colorado sells $400 million

The Public Service Co. of Colorado priced $400 million 5.125% 10-year first mortgage bonds at Treasuries plus 150 bps.

The notes came at the tight end of price guidance of 150 to 155 bps, a source close to the sale said.

The electricity provider is adding proceeds to its general funds and applying them to a payment of $200 million in senior notes due July 15. The balance will be used for repayment of utility money pool borrowings and working capital.

BNP Paribas Securities, Credit Suisse Securities and Scotia Capital were tapped as bookrunners by the Denver-based utility.

Travelers offers 10-years

Holding company for insurance subsidiaries Travelers Companies sold $500 million in 5.9% 10-year senior notes at 225 bps over Treasuries.

The proceeds from the sale will be used for general corporate purposes by the New York City-based company.

Banc of America Securities and Morgan Stanley were active bookrunners.

Pride prices split-rate notes

Houston-based offshore drilling contractor Pride International sold $500 million of 8.5% 10-year senior notes in a split-rated deal.

The notes (Ba1/BBB-) priced at 587.5 bps over Treasuries.

The deal had price guidance in the 500 bps area, the informed source said. There was more interest from high-yield accounts than investment-grade, he said. The split was about 60% interest from junk accounts to 40% on the high-grade side.

Active bookrunners were Citigroup Global Markets and Goldman Sachs & Co.

Proceeds will be used for general corporate purposes including payments to four drill ships under construction and for other capital expenditures.

B of A sells non-FDIC deal

Bank of America priced $2.5 billion of 7.625% 10-year notes late Thursday without the guarantee of the FDIC.

They priced at 410 bps over Treasuries, which was the level at which they were talked.

Banc of America Securities ran the books for the bank holding company based in Charlotte, N.C.

Market tone solid, furthers issuance

As market tone stays upbeat and consistent, the number of bond sales will likely do the same, a market source said late Thursday.

When asked if a slowdown was likely to happen anytime soon, he said "it's not likely."

Thursday was following in the footsteps of the previous two days of the short week, a second source said.

"It's how it's looked all week," he said, adding that it is "no different."

Friday is set to have "a couple of deals at least," the source said.

"I don't know what's solid, but we should see something."

There are no upcoming issues announced, but many financial names have been reopening, or pricing new deals.

When asked if we could see more, following up from Thursday's healthy showing from the financial sector, the source said "maybe."

"I don't know of any personally, but it's possible," he said.

Morgan Stanley moves up

A trader said that both tranches of Morgan Stanley's new $1.5 billion non-FDIC mega-deal were firmer.

He saw the notes - its $500 million of 6% paper due 2014 and $1 billion of 7.30% bonds due 2019 - each having tightened about 10 bps from the 360 bps over spread versus comparable Treasuries at which the New York-based investment bank had priced the bonds.

B of A bumbles and stumbles

On the other hand, he said Bank of America's new $2.5 billion of 7.625% non-FDIC notes due 2019 were "kind of nowhere."

The Charlotte, N.C.-based banking giant had priced those bonds at 410 bps over. On the break, they had tightened a little, in as much as 7 bps to 403 bps, but then they surrendered those early gains to swing back out to 410 bps bid, 405 bps offered.

Travelers moves along

He saw Travelers Cos. Inc.'s $500 million of 5.90% notes due 2019 "actually do better, a lot better," firming to a level of 207 bps bid, 205 bps offered.

The New York-based insurer - recently relocated from its original home in St. Paul, Minn. - priced those bonds earlier in the session at 225 bps over.

Goldman gets tighter

And he saw Goldman Sachs Group Inc.'s $1 billion re-opening of its 7½% notes due 2019 at 330 bps bid, 325 bps offered - in a little from the 337.5 bps spread at which the New York-based investment bank had priced those bonds on Wednesday.

CBS bonds firm

While CBS was pricing a reopened 10-year issue, the New York-based media giant's recently priced 8.20% notes due 2014 were seen nearly 40 bps tighter at 520 bps over.

The $400 million of the bonds originally priced at 635.5 bps over on May 8, as part of a two-part $750 million offering.

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