KeyCorp does FDIC-backed deal, Allegheny unit prices Rule 144A deal

By Andrea Heisinger and Paul Deckelman

New York, Dec. 10 - KeyCorp and Monongahela Power Co. each priced deals Wednesday as issuance volume slowed for the second day in a row.

The week began with a torrent of new offerings, which had been predicted to ease as the week wore on.

In the investment-grade secondary market Wednesday, advancing issues led decliners by a five-to-four ratio. Overall market activity, reflected in dollar volumes, was not much changed from Tuesday's pace.

Spreads in general were seen a little tighter, in line with higher Treasury yields; for instance, the yield on the benchmark 10-year issue rose by 5 basis points to 2.68%.

KeyCorp prices FDIC notes

KeyCorp was the latest name to price bonds backed by the Federal Deposit Insurance Corp. Temporary Liquidity Guarantee Program.

The deals have begun to trickle down to more regional names, although the largest investment banks are still issuing under the guarantee, but in smaller amounts.

KeyCorp priced its deal in two tranches, one of fixed-rate notes and one of floating-rate.

The $1 billion of 3.2% notes due 2012 priced at 99.905 to yield 3.229% with a spread of Treasuries plus 211 basis points.

The $250 million of two-year floaters priced at par to yield three-month Libor plus 65 bps.

KeyBanc Capital Markets, Credit Suisse Securities, Morgan Stanley & Co., Inc. and UBS Investment Bank were bookrunners.

Monongahela Power brings $300 million

Electric company Monongahela Power priced $300 million of 7.95% five-year first mortgage bonds at Treasuries plus 639 bps.

They were priced under Rule 144A.

Credit Suisse Securities, Banc of America Securities LLC and Nova Scotia ran the books.

HSBC gives FDIC deal terms

HSBC USA released terms for its $2 billion of 3.125% three-year notes backed by the FDIC that were priced late Tuesday.

The senior unsecured notes priced at 99.943 to yield 3.145% with a spread of Treasuries plus 203.1 basis points.

HSBC Securities Inc. was bookrunner.

Goldman adds to FDIC deal

Goldman Sachs Group Inc. reopened its two-year floating-rate notes backed by the FDIC to add $200 million on Monday, according to a 424B2 Securities and Exchange Commission filing.

The reopened notes priced at 100.0594 and have a coupon of three-month Libor plus 50 bps.

Total issuance is $775 million including $575 million priced Dec. 3.

Goldman Sachs & Co. ran the books.

Solid tone, issuers lacking

A market source said he wasn't sure why there weren't more new deals Wednesday, as market conditions were as good as to be expected.

There weren't really any "straight corporates," he said, referring to those not issuing under the FDIC guarantee.

"The backdrop was not that bad," he said. "Equities were up."

There isn't a lot remaining this week on the firm calendar, the source said

"A lot of [companies] hopped in that window [Monday]," he said.

Predictions that much of the week's deals had already come to the market at the top of the week were apparently true, although there remains a limited amount of time to price before year's end.

"The end of next week will be the end of business for December, pretty much," a source said.

The FDIC-backed deals should keep coming, he said, along with a few opportunistic issuers taking advantage of the present market tone.

There was a sell-off in Treasuries during the past day and a half, a source said, which has improved conditions somewhat.

"You would think people would want to be issuing right now, but I guess not," he said. "It's kind of strange."

New du Pont bonds seen tighter

The big deal in Tuesday's session - EI du Pont de Nemours & Co.'s $1 billion offering of new 5.875% five-year notes -- was seen a trading a little tighter Wednesday, with a trader seeing those bonds at a bid spread of 430 bps over comparable Treasuries. The Wilmington, Del.-based chemical giant had priced the bonds Tuesday at 437 bps over.

New FPL bonds light up session

But the clear star of the show was FPL Group Inc.'s new 7.875% seven-year deal; the Juno Beach, Fla.-based electric power generating company's $450 million of new notes were trading around at 550 bps bid, 545 bps offered - "in by a lot" a trader said, versus the 596 bps over level at which the bonds had priced on Tuesday.

Shell bonds remain wider than issue

The trader saw Shell International Finance BV's new 6.375% bonds due 2038 trading at 333 bps bid, 328 bps offered.

That's still somewhat wider than the 325 bps lever at which the multinational energy giant had priced its $2.75 billion of bonds, which then widened out by as much as 10 or 15 bps from that point in initial aftermarket dealings Monday.

The bonds had narrowed a little on Tuesday to 335 bps bid, 332 bps offered.

General Dynamics remain firmer

General Dynamics Corp.'s new 5.25% notes due 2014 were hovering at 350 bps bid, 343 bps offered on Wednesday, not much changed from 348 bps bid, 345 bps offered seen on Tuesday, but still considerably tighter than the 365 bps over level at which the Fairfax, Va.-based defense contractor had priced its $1 billion of new bonds on Monday.

Hewlett Packard tightens again

A trader saw Hewlett Packard Co.'s 6.125% notes due 2014 at 380 bps bid, 370 bps offered, well in from 395 bps bid, 385 bps offered on Tuesday and in still further from the 407 bps over level at which the issue had been trading at the start of the week on Monday.

A market source said that it was easily the busiest issue of the day, having traded nearly $70 million by late in the afternoon.

Those notes have tightened solidly from the 460 bps over level at which the Palo Alto, Calif.-based computer equipment maker had priced its $2 billion of new bonds back on Dec. 2.

The trader said that whether because the deal priced too cheaply or just because investors like the credit, "it seems to be a popular one, for whatever reason."

Verizon, Wal-Mart actively traded

Apart from the new deals trading in secondary he said, "nothing specific" stood out; there was just "a little bit of everything across the board."

Other fairly active issues on the day included Verizon Communications' 8.75% notes due 2018, seen trading late in the day at 514 bps over on almost $46 million bonds traded, and the New York-based telecom giant's 7.75% notes due 2030, trading at 462 bps over

Wal-Mart Stores Inc.'s 4% notes due 2010 traded at 209 bps over, with over $40 million changing hands.

Prudential a big winner

A major gainer on the day was Prudential Financial, whose 5.15% notes due 2013 tightened by more than 100 bps, to about the 925 bps level.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.