Progressive, Fifth Third hit primary market; spreads firm overall; new issues trade tighter

By Aleesia Forni

Virginia Beach, April 22 - Progressive Corp. and Fifth Third Bancorp brought new issues to Tuesday's primary market, while investment-grade credit spreads traded better during the session.

Fifth Third came to market with a $1.5 billion offering of senior notes Tuesday in three- and five-year tranches, a market source said.

A $650 million issue of 1.35% three-year notes sold at the tight end of talk with a spread of Treasuries plus 45 basis points.

There was also $850 million of 2.375% five-year notes, which sold at Treasuries plus 65 bps.

The notes sold in line with the Treasuries plus 65 bps area talk.

Also on Tuesday, Progressive priced $350 million of 4.35% senior notes due 2044 at Treasuries plus 87.5 bps.

Pricing was in line with guidance, which was set at 85 bps to 90 bps over Treasuries.

In the preferred market, Morgan Stanley & Co. Inc. came to market with a double deal of its own following Goldman Sachs Group Inc.'s dual offering on Monday. The New York-based investment bank said it was selling $25-par series G noncumulative perpetual preferred stock, as well as $1,000-par series H fixed-to-floating-rate noncumulative perpetual preferreds.

The company sold $500 million of the $25-par preferreds at 6.625% and another $1.3 billion of the $1,000-par preferreds at 5.45%.

In other market action, KfW said it will price an offering of 18-month floating-rate notes due 2015, an informed source said.

The session also saw Inter-American Development Bank announce price guidance for its planned offering of five-year global notes, a market source said.

The notes are guided in the area of mid-swaps minus 2 bps.

Amidst the ongoing earnings season, issuers have sold roughly $8 billion of high-grade paper so far this week.

Investment-grade credit spreads were mostly tighter during Tuesday's trading, market sources said.

The Markit CDX North American Investment Grade series 22 index was seen ending the day 2 bps tighter at a spread of 65 bps.

In the secondary market, a market source quoted Fifth Third's five-year notes 1 bp tighter in aftermarket trading.

The company's three-year notes traded at 44 bps offered, a market source said.

Progressive's $350 million of 30-year notes were also trading better near the end of the session.

Post-pricing, a market source quoted Morgan Stanley's $25-pars at $25.05 offered and the $1,000-pars at 101.375.

Also during the session, a source noted that bank and brokerage CDS prices fell on the day.

Fifth Third two-parter

Fifth Third Bancorp priced $1.5 billion of senior notes (A3/A-/A) on Tuesday in tranches due 2017 and 2019, according to a market source.

The sale included $650 million of 1.35% three-year notes, which priced at 99.954 to yield 1.365%, or Treasuries plus 45 bps. The issue priced at the tight end of talk.

A second tranche was $850 million of 2.375% five-year notes sold in line with talk at a spread of Treasuries plus 65 bps.

Pricing was at 99.934 to yield 2.389%.

The new tranche of notes due 2017 traded at 44 bps offered near the day's close, a source said.

The five-year notes were quoted at 64 bps bid, 63 bps offered by a market source late during Tuesday's session.

Barclays, Fifth Third Securities Inc., Goldman Sachs & Co. and Morgan Stanley & Co. LLC were the joint bookrunners.

The Cincinnati-based financial services company plans to use proceeds for general corporate purposes.

Progressive in line with talk

Progressive sold a $350 million issue of 4.35% 30-year senior notes (A1/A+/A) on Tuesday with a spread of Treasuries plus 87.5 bps, according to a market source and an FWP filed with the Securities and Exchange Commission.

The notes sold in line with guidance, which was set at 85 bps to 90 bps over Treasuries.

Pricing was at 99.684 to yield 4.369%.

Goldman Sachs was the bookrunner.

The issue was quoted at 84 bps offered by a trader late Tuesday.

Proceeds will be used for general corporate purposes, which may include the repurchase of the company's outstanding securities and repayment or redemption of outstanding debt.

The insurance company is based in Mayfield Village, Ohio.

Morgan Stanley $1,000-par preferreds

Morgan Stanley priced a $1.3 billion offering of 5.45% $1,000-par series H fixed-to-floating-rate noncumulative perpetual preferred stock (expected ratings: Ba3/B+/BB/BBB-high), according to an FWP filed with the SEC on Tuesday.

The preferreds will be issued as depositary shares representing a 1/25th interest.

Morgan Stanley is running the books.

When declared, dividends will be payable on a semiannual basis at a fixed rate until July 15, 2019. At that time, the dividend will begin floating at Libor plus 361 bps and will be payable quarterly.

The shares can be redeemed on or after July 15, 2019 or in whole within 90 days of a regulatory capital treatment event at par plus accrued dividends.

The preferreds will not be listed on any exchange.

The New York-based investment bank will use proceeds for general corporate purposes.

Morgan Stanley $25-par preferreds

Morgan Stanley also sold $500 million of 6.625% $25-par series G noncumulative perpetual preferred stock (expected ratings: Ba3 / BB+ / BB / BBB-high), the company said in an FWP filed with the SEC.

Morgan Stanley is the sole bookrunner.

When declared, dividends will be payable on the 15th of January, April, July and October, beginning July 15.

The New York-based investment firm can redeem the shares on or after July 15, 2019 or in whole within 90 days of a regulatory capital treatment event at par plus accrued dividends.

Proceeds will be used for general corporate purposes.

IADB sets guidance

Inter-American Development Bank is planning to price an offering of five-year global notes this week, according to a market source.

The notes are being guided in the area of mid-swaps minus 2 bps.

J.P. Morgan Securities LLC, Morgan Stanley, RBC Capital Markets LLC and TD Securities are the joint bookrunners.

The issuer provides financing for Latin American and Caribbean countries and is based in Washington, D.C.

KfW eyes floaters

KfW plans to price an offering of floating-rate notes due 2015, according to an informed source.

HSBC Securities and Morgan Stanley are the joint bookrunners.

The German government-owned development bank is based in Frankfurt.

Bank/brokerage CDS prices fall

Investment-grade bank and brokerage CDS prices declined, according to a market source.

Bank of America Corp.'s CDS costs firmed 3 bps to 61 bps bid, 64 bps offered. Citigroup Inc.'s CDS costs tightened 1 bp to 69 bps bid, 72 bps offered. JPMorgan Chase & Co.'s CDS costs fell 3 bps to 54 bps bid, 57 bps offered. Wells Fargo & Co.'s CDS costs were unchanged at 37 bps bid, 40 bps offered.

Merrill Lynch's CDS costs firmed 3 bps to 64 bps bid, 69 bps offered. Morgan Stanley's CDS costs declined 5 bps to 71 bps bid, 76 bps offered. Goldman Sachs Group, Inc.'s CDS costs tightened 3 bps to 85 bps bid, 90 bps offered.

Stephanie Rotondo contributed to this review.

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