HSBC, Hess, VW, UBS, Schwab sell ahead of jobs report; new bonds weaker in secondary market

By Andrea Heisinger and Cristal Cody

New York, Aug. 5 - Hess Corp., HSBC Bank, Volkswagen International Finance NV, UBS AG, Stamford branch and Charles Schwab Corp. priced bonds in the high-grade market Thursday in a stream of new deals that seems never ending.

There was about $8.35 billion in new bonds priced, with all but two of the day's sales totaling $1 billion or more.

Hess was among the first to price, with its $1.25 billion deal of long 30-year bonds.

Other deals were done late in the day.

CNA Financial Corp. priced $500 million of 10-year notes, and the size of the deal did not grow from what was announced in the morning.

UBS sold $1.5 billion of three-year bank notes in part of a new trend in short bonds.

There was a reopening of 4.45% 10-year notes by Charles Schwab to add $100 million. It brought the outstanding amount to $700 million, with the new bonds pricing about 20 basis points cheaper at the spread.

HSBC Bank, the banking subsidiary of HSBC Holdings plc, had the biggest sale of the day totaling $3.25 billion in an upsized three tranches. The deal was originally fixed-rate notes in three-year and 10-year maturities, with a three-year floater added later.

Volkswagen priced its $1.75 billion of three-year and 10-year notes tighter than talk.

Issuers wanted to get into the market ahead of the jobs data that comes out Friday, a market source said.

"Everyone's expecting [numbers] to be bad on that," he said. "I think that will be a breather day."

In the secondary market, the new notes from Hess and HSBC Bank were weaker in initial trading, while split-rated bonds from Pride International Inc. continue to rally, sources said.

The CDX Series 14 North American investment-grade index eased 2 bps on Thursday to a spread of 102 bps, a source said.

Overall investment-grade Trace volume slipped 4% to about $12.5 billion, according to a source.

Treasuries rose on Thursday, pushing yields down, on renewed economic concerns from a jump in unemployment claims.

The yield on the 10-year note fell 5 bps to 2.9%. The yield on the 30-year bond fell 3 bps to 4.05%.

VW prices $1.75 billion

Volkswagen International Finance sold $1.75 billion of notes (A3/A-) in two tranches late in the afternoon under Rule 144A, a source close to the sale said.

A $1 billion tranche of 1.625% three-year notes priced at a spread of 93 bps over Treasuries. This was tighter than talk in the 100 bps area.

The second $750 million tranche of 4% 10-year notes priced at Treasuries plus 125 bps. This was at the tight end of guidance in the 125 bps area.

Bank of America Merrill Lynch, Citigroup Global Markets and J.P. Morgan Securities were the bookrunners.

The financing arm of Volkswagen is based in Amsterdam.

Foreign financials hit primary

In a reversal from previous days, there were mostly financials pricing bonds for the day, and they were from mostly overseas names.

UBS, HSBC and Volkswagen International Finance all priced bonds, taking advantage of the low interest rates happening in the U.S. market.

"It makes sense," a syndicate source said. "It's the same reason domestics are pricing."

A market source said he had "no idea" why all of these foreign names were pricing.

"I think maybe it was just coincidence," he said. "Or one jumps [in], and the others follow."

The market felt "constructive" again, which was another reason issuers were flocking to the primary market, he said.

"I don't think there will be much tomorrow, but you never know," the market source added.

So far, the week has had about $31 billion in new bonds priced.

CNA offers $500 million

CNA Financial sold $500 million of 5.875% 10-year senior unsecured notes on Thursday at Treasuries plus 300 bps, according to an FWP filing with the Securities and Exchange Commission.

The deal priced at the tight end of talk that was whispered at 312.5 bps before guidance was lowered to the 310 bps area, a source who worked on the trade said.

Demand for the bonds was "unreal" even though it was a small trade, she said. There was north of $2.75 billion on the books by the time guidance was lowered, but when it was being whispered at the higher spread, there was more like $3 billion.

The notes (Baa3/BBB-) priced at 99.685 to yield 5.917%. They are callable at a make-whole of Treasuries plus 45 bps.

Bank of America Merrill Lynch, Barclays Capital Inc., Citigroup Global Markets and Morgan Stanley & Co. Inc. were the bookrunners.

Proceeds are being used to redeem 2008 senior preferred stock from majority stockholder Loews Corp. at $100,000 per share, plus accrued dividends.

The insurance company is based in Chicago.

UBS prices bank notes

UBS priced $1.5 billion of 2.25% three-year bank notes (Aa3/A+/A+) late in the day to yield Treasuries plus 150 bps, a market source away from the sale said.

UBS Investment Bank was on the books.

In secondary market activity, the notes due 2013 firmed by mid-afternoon, according to sources.

The notes were quoted tighter at 145 bps bid, 140 bps offered before moving out 10 bps on the offer side to 145 bps bid, 150 bps offered near the market close, traders said.

The financial services company is based in Basel and Zurich, Switzerland.

Hess prices $1.25 billion

Hess sold $1.25 billion of 5.6% senior unsecured notes due 2041(Baa2/BBB/BBB) by early afternoon to yield Treasuries plus 160 bps, a syndicate source away from the sale said.

They were also talked at 160 bps, the source said.

The bookrunners were Goldman, Sachs & Co., JPMorgan and Morgan Stanley.

Proceeds are being used to finance the acquisition of the Valhall and Hod Fields in Norway, which is expected to close in the third quarter. Any excess is being used for general corporate purposes and working capital.

In secondary trading, the bonds were weaker initially on the bid side at 162 bps bid, 160 bps offered, a trader said. By late afternoon, another trader saw the notes tighter on the offer side at 158 bps.

The global energy company is based in New York.

HSBC sells three tranches

London-based HSBC Bank sold $3.25 billion of notes (Aa2/AA/AA) in an upsized three tranches, an informed source said.

A $500 million tranche of three-year floating-rate notes was added as the deal was launched. They were priced at par to yield Libor plus 65 bps.

The $1.25 billion of 1.625% three-year notes priced at a spread of Treasuries plus 87.5 bps. The second tranche of $1.5 billion in 4.125% 10-year notes priced at 130 bps over Treasuries.

The notes were priced under Rule 144A.

The bookrunner was HSBC Securities.

The 1.625% notes widened on the bid side to 90 bps in secondary trading, according to a source.

In addition, the tranche due 2020 moved out late in the day to 133 bps offered.

Schwab reopens 10-years

Charles Schwab reopened its issue of 4.45% 10-year senior notes to add $100 million, according to an FWP filing with the SEC.

The notes (A2/A/A) priced at a spread of Treasuries plus 130 bps.

Total issuance is $700 million including the $600 million issued on July 22 at Treasuries plus 150 bps.

JPMorgan ran the books.

Proceeds are being used for general corporate purposes.

The brokerage and financial services company is based in San Francisco.

ANZ Banking gives terms

ANZ Banking Group Ltd. sold $500 million of floating-rate notes due 2012 on Wednesday at par to yield Libor plus 20 bps, a market source said early Thursday.

The notes (Aa1/A) are non-callable and were sold under Rule 144A.

Deutsche Bank Securities ran the books.

The financial services company is based in Melbourne, Australia.

Pride bonds 'on fire'

A trader said Thursday that Pride International's new split-rated bonds (Ba1/BBB-/BB+) "continue to be on fire," quoting its 6.875% notes due 2020 as having moved up to 104½ bid, 105 offered - up from 103 bid, 103 3/8 offered on Wednesday and Tuesday's closing level around 102 bid.

The Houston-based offshore energy drilling company's $900 million issue priced at par earlier Tuesday, along with a $300 million offering of 7 7/8% notes due 2040. The latter bonds had also firmed smartly in the aftermarket late Tuesday and on Wednesday, moving up to the 103¼ bid level, but a trader said Thursday that he had not seen those bonds trading.

Paul Deckelman contributed to this report

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