Kommunalbanken, SunTrust price as primary pace slows; spreads mostly unchanged; SunTrust flat

By Aleesia Forni

Virginia Beach, April 24 - High-grade primary activity was light on Thursday, as Kommunalbanken AS and SunTrust Banks Inc. sold new deals during the session.

Meanwhile, cash continues to flow into investment-grade bond funds.

For the week ending April 23, investment-grade funds saw an inflow of $1.47 billion, according to Lipper.

This figure is up from inflows of $670.5 million seen during the previous week.

In primary action on Thursday, SunTrust Banks brought to market a $650 million issue of 2.5% five-year notes during the session.

The issue sold at the tight end of talk with a spread of Treasuries plus 80 basis points, according to a market source.

The session also saw Kommunalbanken AS price $500 million of five-year floating-rate notes to yield Libor plus 13 bps, according to a market source.

The preferred market saw Regions Financial Corp. price $500 million of preferreds at par to yield 6.375%.

The issue switches to a floating rate of Libor plus 353.6 basis points beginning Sept. 15, 2024.

More than $20 billion of investment-grade paper has priced so far this week, topping estimates of $15 billion to $20 billion of supply.

In the secondary market, one trader noted that spreads were mostly "unchanged to a bit tighter" on Thursday.

"Seems like things felt a little heavy today," another market source said. "We didn't see much flow here."

The source saw the new $650 million issue of 2.5% five-year notes from SunTrust Bank trade flat near the end of the session.

After pricing, a trader said Region's new preferreds had "traded up strong," but then someone was throwing paper back into the mix, causing the issue to "get banged up a bit."

He saw the preferreds ending at $24.73 bid.

Another trader quoted the preferreds at $25.75 bid, $24.80 offered.

SunTrust prices tight

SunTrust Banks priced $650 million of 2.5% notes due 2019 at Treasuries plus 80 bps, according to a market source and a FWP filed with the Securities and Exchange Commission on Thursday.

Pricing was at 99.911 to yield 2.519%.

Proceeds will be used for general corporate purposes.

The notes were quoted at 80 bps bid, 77 bpd offered late Thursday.

Barclays, Credit Suisse Securities (USA) LLC and SunTrust Robinson Humphrey Inc. were the bookrunners.

SunTrust is an Atlanta-based financial services company.

Kommunalbanken sells floaters

Kommunalbanken sold $500 million of floating-rate notes (Aaa/AAA/) due 2019 at par to yield Libor plus 13 bps, a market source said.

The sale was done under Rule 144A and Regulation S.

The bookrunners were Barclays, J.P. Morgan Securities LLC and RBS Securities Inc.

The government-funded lender to municipalities is based in Oslo.

Regions sells preferreds

Regions Financial priced $500 million of 6.375% series B fixed-to-floating rate noncumulative perpetual preferred stock, according to a market source on Thursday.

Goldman Sachs & Co. Deutsche Bank Securities Inc., JPMorgan Securities LLC and Morgan Stanley & Co. LLC are the joint bookrunning managers.

When declared, dividends will be payable at a fixed rate on a quarterly basis through Sept. 15, 2024. At that time, the preferreds will begin floating at Libor plus 353.6 bps, still on a quarterly basis.

The Birmingham, Ala.-based bank can redeem the preferreds on or after Sept. 15, 2024 or in whole upon the occurrence of a regulatory capital treatment event at par plus accrued dividends.

Proceeds will be used for general corporate purposes, which may include common stock repurchases.

Bank/brokerage CDS lower

Investment-grade bank and brokerage CDS prices were mostly lower on Thursday, according to a market source.

Bank of America Corp.'s CDS costs firmed 1 bp to 61 bps bid, 64 bps offered. Citigroup Inc.'s CDS costs declined 1 bp to 68 bps bid, 71 bps offered. JPMorgan Chase & Co.'s CDS costs tightened 1 bp to 55 bps bid, 57 bps offered. Wells Fargo & Co.'s CDS costs were unchanged at 35 bps bid, 38 bps offered.

Merrill Lynch's CDS costs declined 1 bp to 66 bps bid, 70 bps offered. Morgan Stanley's CDS costs declined 2 bps to 70 bps bid, 75 bps offered. Goldman Sachs Group, Inc.'s CDS costs widened 1 bp to 83 bps bid, 86 bps offered.

Stephanie Rotondo contributed to this review

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