HCP sells multi-part deal, IBRD, Pefco price; Progress Energy, Bacardi firm, banks widen

By Andrea Heisinger and Cristal Cody

New York, Jan. 19 - HCP, Inc., International Bank for Reconstruction & Development and Private Export Funding Corp. sold bonds as sovereigns and overseas names again ruled the investment-grade bond primary market on Wednesday.

There was a lone corporate sale for the day, and sources said they don't expect many more for a week or two as earnings season rolls on.

"I don't think we're going to have a lot of excitement," a source said late in the afternoon. "We could have a few jump in after earnings, but nothing so far."

It's possible big banks could sell bonds after giving their quarterly numbers, the source added. Citigroup Inc. and Goldman Sachs & Co. have already reported, with Bank of America Corp. expected later in the week.

There was a late sale from HCP, which sold $2.4 billion in an increased four tranches. A 30-year bond was added on demand from investors, a source said. The sale was highly oversubscribed with about $11.5 billion on the books.

IBRD had one of the first sales of the day after the $5 billion deal of five-year notes went overnight and opened its books early Wednesday.

A reopening of notes from Pefco priced at about the same time. Its issue of 4.375% notes due 2019 was reopened to add $100 million.

Fifth Third Bancorp announced that in addition to a common stock offering, it would also be selling senior notes to repurchase its preferred shares issued through the Troubled Asset Relief Program.

There was a sale in the preferred stock market from LaSalle Hotel Properties. The real estate investment trust priced $65 million of perpetual preferred stock after the sale went overnight.

Trading volume softens

Overall investment-grade Trace volume dropped 4% on Wednesday to less than $14 billion, a source said.

In the secondary market, the notes priced the previous day from Progress Energy, Inc. and Bacardi Ltd. tightened early on Wednesday, a trader said.

Bank and financial paper was seen trading 3 basis points to 5 bps wider late Wednesday, a source said.

"It was pretty strong this morning straight out of the gates," the source said. "There was a bit of weakness in the afternoon. I actually expected to see more weakness this morning with the potential for new issues coming out, but we didn't see a ton and now we're closing out the day unchanged to a couple basis points wider."

The Markit CDX Series 14 North American investment-grade index eased 1 bp to a spread of 84 bps, a source said.

Government bonds rallied on weaker economic numbers, with the long end of the yield curve falling.

Trading was light and volatile, market participants said.

"It was a choppy session," said Mary Ann Hurley, a fixed income trader for D.A. Davidson & Co. "It opened up lower in the day, moved to unchanged and now is higher."

The yield on the 10-year note fell to 3.34% from 3.37%. The 30-year bond yield fell 3 bps to 4.53%.

HCP prices $2.4 billion

Real estate investment trust HCP priced $2.4 billion of senior notes (Baa2/BBB/BBB) in an upsized four parts late in the day, a source close to the offering said.

A tranche of 30-year bonds was added late in the day just prior to the launch, a source said.

A $400 million tranche of 2.7% three-year notes priced to yield Treasuries plus 175 bps. Price talk was at 15 bps versus the five-year spread, the source said, and the notes priced in line with that talk.

A $500 million tranche of 3.75% five-year notes sold at 190 bps over Treasuries. The tranche priced in line with talk of 10 bps versus the 10-year tranche's spread.

The $1.2 billion tranche of 5.375% 10-year notes priced at a spread of Treasuries plus 210 bps. The notes sold well below guidance that was in the 225 bps area.

The final part was $300 million of 6.75% 30-year bonds priced at Treasuries plus 230 bps. The tranche was a late addition to the bond offering due to investor demand, and there was no price talk for it.

Bank of America Merrill Lynch, UBS Securities LLC and Wells Fargo Securities LLC were the active bookrunners.

Proceeds are being used to finance a portion of the cash consideration for the acquisition of HCR ManorCare Facilities. If the acquisition is not completed by the acquisition termination date, the company will be required to redeem all notes on a special date at a special price.

The REIT for the health care industry is based in Long Beach, Calif.

IBRD sells $5 billion

The IBRD sold $5 billion of 2.125% five-year notes (Aaa/AAA/AAA) by early afternoon at a spread of 1 bp over mid swaps, an informed source said early in the afternoon.

The sale had been announced on Tuesday and went overnight.

Bank of America Merrill Lynch, Goldman Sachs & Co., Morgan Stanley & Co., Inc. and RBC Capital Markets Corp. were the bookrunners.

The arm of the World Bank that provides loans to developing countries is based in Washington, D.C.

Pefco reopens notes due 2019

The Private Export Funding Corp. reopened its issue of 4.375% notes due 2019 by early afternoon to add $100 million, a market source away from the deal said.

The notes (Aaa/AA+) sold at a spread of Treasuries plus 10 bps.

U.S. Bancorp Securities LLC was the bookrunner.

The company assists with financing U.S. exports through private capital and is based in New York City.

Fifth Third to repay TARP

Fifth Third Bancorp announced late Wednesday that it intends to sell senior notes, along with a common stock offering, to repurchase preferred stock from the U.S. Department of Treasury, according to a press release and FWP filing with the Securities and Exchange Commission.

The company plans to sell $1.7 billion of common shares, along with the senior notes, to repurchase the 136,320 shares of series F preferred stock issued under the TARP Capital Purchase Program.

J.P. Morgan Securities LLC, Deutsche Bank Securities Inc., Credit Suisse Securities (USA) LLC and Goldman, Sachs are the bookrunners for the common stock sale, and likely for the senior note offering.

"We believe this action, and the anticipated repurchase of TARP preferred stock, will close a chapter for Fifth Third and open a new and better one," said Kevin Kabat, president and CEO of Fifth Third Bancorp, in a news release.

"We have maintained a strong focus on revenue generation and expense management, while taking action to deal with credit issues from early in the cycle and to increase our capital and its quality. That focus and those actions provided the foundation for Fifth Third's more than $500 million of net income to common shareholders in 2010 and for our strong capital position - both of which will be further enhanced with this offering and the repayment of TARP."

The financial services holding company is based in Cincinnati.

LaSalle prices preferreds

LaSalle Hotel Properties priced $65 million, or 2.6 million shares, of perpetual series H cumulative redeemable preferred shares at par of $25.00, an informed source said.

The sale went overnight after being announced early on Tuesday.

Wells Fargo Securities LLC was the active bookrunner.

Proceeds will be used to redeem outstanding series B preferred shares, to reduce amounts outstanding under a senior unsecured credit facility, for future acquisitions, working capital, and other general corporate purposes including the redemption of other outstanding series of preferred shares.

The real estate investment trust of hotel properties is based in Bethesda, Md.

Progress Energy firms

Progress Energy's $500 million of 4.4% 10-year senior notes (Baa2/BBB/BBB) that priced on Tuesday to yield Treasuries plus 108 bps tightened a couple bps in the secondary market.

"Early this morning, they were 106, 101," a trader said.

The public utility holding company for electric subsidiaries is based in Raleigh, N.C.

Bacardi tightens

Bacardi sold $300 million of 4.5% 10-year notes (Baa1/BBB) at a spread of Treasuries plus 115 bps on Tuesday.

The notes firmed to 108 bps bid, 105 bps offered in secondary trading, a trader said.

The spirits company is based in Hamilton, Bermuda.

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