Morgan Stanley, Caterpillar Financial, Regions Bank price to cap record week; coming week seen slower

By Andrea Heisinger

Omaha, May 9 - It was a record week for new issuance as companies priced more than $43 billion including deals from Morgan Stanley, Caterpillar Financial Services Corp. and Regions Bank on Friday.

That total likely made it the largest week on record, a market source said. If not the largest week ever, it was at least the record for this year and 2007, he added.

Market conditions remained steady throughout the five trading days, offering prime opportunity for building capital at spreads that weren't too shocking.

Morgan Stanley pays 210 bps

Morgan Stanley came to the market with $4 billion Friday, adding its name to a list of financials that priced throughout the week to raise capital after write downs.

The company priced a $2 billion tranche of two-year floating-rate notes at par to yield three-month Libor plus 210 basis points.

The level was surprising to one market source.

"That was an interesting trade," he said. "The level of 210 over Libor is pretty indicative of how broken the market is right now."

Broker names used to be able to price at 12 or 15 bps over Libor, he said.

The other tranche of the issue was a reopening of the company's 6% seven-year notes to add $2 billion.

They priced at 99.03 to yield 6.173% with a spread of Treasuries plus 287.5 bps.

Total issuance is now $3.5 billion including $1.5 billion priced April 23 at 275 bps.

Morgan Stanley & Co. Inc. was bookrunner for the issue.

Regions upsizes

Regions Bank priced an upsized $750 million of 7.5% 10-year notes at 99.917 to yield 7.512% with a spread of Treasuries plus 375 bps.

The issue size was increased from $400 million, and it priced in line with price talk of the 375 bps area, a source close to the deal said.

Goldman Sachs & Co., J.P. Morgan Securities Inc., Lehman Brothers Inc. and Merrill Lynch, Pierce, Fenner & Smith Inc. ran the books.

Caterpillar Financial priced $125 million of two-year medium-term floating-rate notes at par to yield three-month Libor plus 50 bps.

RBS Greenwich Capital and Barclays Capital Inc. were agents.

PrivateBancorp plans trust preferreds

An upcoming issue was announced from Private Bancorp Capital Trust IV.

The company plans to price $75 million trust preferred securities with a final repayment of June 15, 2068.

They are non-callable for five years and will be priced at par of $25. The issue carries an over-allotment option of up to $11.25 million.

Stifel Nicolaus, RBC Capital Markets and Robert W. Baird & Co. are bookrunners.

Issuing companies for the week included a mix of industrial and financial names including one that brought a deal that was in the top five biggest corporate issues ever.

Those at or above the $1 billion mark included ConocoPhillips Co., Citigroup Inc., Bank of America Corp., Citigroup Funding Inc., GlaxoSmithKline Capital Inc., Berkshire Hathaway Finance Corp., JPMorgan Chase Capital XXVI, Quebec, Merrill Lynch & Co., Inc., Nordic Investment Bank and AT&T Inc.

Smaller issuers included Duke Realty LP, TransAlta Corp., Grupo Televisa SAB, Hartford Financial Services Group, Inc., Colgate-Palmolive Co., KeyCorp, Coca-Cola Enterprises Inc., Travelers Cos. Inc., Alabama Power Co. and Korea Railroad Corp.

The $9 billion, four tranche issue from GlaxoSmithKline was the fifth largest corporate issue ever, sources said.

It was increased from three tranches and $6 billion.

The issue priced when it did because market conditions were right, with spreads tightening, a source said.

The coming week has a decent calendar and will likely land in the $25 to $35 billion range, a source said.

Most new deals tighter

Investment-grade secondary trading remained quiet Friday as the focus was again on the primary.

The Regions Bank issue was seen at 373 bps bid after pricing at 375 bps over Treasuries.

Thursday's issue from Travelers was seen widening slightly to 205 bps bid, 200 bps offered versus 200 bps pricing.

Morgan Stanley's reopened tranche of 6% seven-year notes was seen at 285 bps bid, 280 bps offered after pricing at 287.5 bps.

The three-tranche issue from AT&T Thursday was seen tighter or mostly unchanged.

The 4.95% five-year notes tightened to 164 bps bid, 161 bps offered from pricing at 168 bps over Treasuries, while the 5.6% 10-year notes were seen mostly unchanged at 185 bps bid, 183 bps offered from pricing at 185 bps.

The 6.4% 30-year notes were slightly wider at 191 bps bid, 188 bps offered from pricing at 190 bps.

There was a reason things were "very quiet" in the secondary, a source said.

"AIG kind of took the wind out of the sails today," he said, referring to the company's record first-quarter loss.

The trend of issues tightening after pricing continued in general, with insurance companies among those tending to do well, he said.

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