Morgan Stanley, Westpac, EDF, Digital Realty among bond sales; financials hurt by Obama's plans

By Andrea Heisinger and Cristal Cody

New York, Jan. 21 - Westpac Securities NZ Ltd., Morgan Stanley, Nordea Bank AB, Electricite de France SA, Validus Holdings Ltd. and Digital Realty Trust, LP each sold bonds on a Thursday when issuers were spurred into the market by an earnings announcement.

Goldman Sachs & Co. reported its highly-anticipated earnings in the morning, and did not disappoint. It was after the news of the financial's record profit for 2009 that other deals were announced.

Morgan Stanley's $4 billion sale in two tranches was among those. It priced $2 billion of five-year notes and $2 billion of 10-year notes. The deal came a day after its own earnings announcement.

Electricite de France had the largest offering of the day, and it was also the last to price. The $2.25 billion of notes in 10- and 30-year tranches was sold after the market closed, and priced under Rule 144A.

Westpac Securities priced $500 million of three-year notes in the morning, after the offering went overnight to include a more diverse group of investors from Asia and Europe.

The afternoon also brought a pricing from Sweden's Nordea Bank. Nordea sold $1.25 billion in 10-year notes.

Insurance and reinsurance company Validus Holdings priced $250 million in 30-year bonds in a sale that went overnight from Wednesday.

Real estate investment trust Digital Realty sold $500 million of 10-year notes tight to price guidance. The sale was also unofficially upsized from $350 million, a source said.

Secondary activity remained strong in new offerings priced this week, though the financial sector took a "hit" on Thursday, according to sources.

Following the day's good news from Goldman Sachs came an afternoon press conference from president Barack Obama on proposed bank legislation to limit the size and trading activities of financial institutions as a way to reduce risk-taking and prevent another financial collapse. That more than canceled any boost to the market from Goldman's news.

"Talk about being on the wrong side of a trade," a source said.

Treasuries continued to tighten a second day on Thursday. For example, the yield on the 10-year Treasury note tightened 6 bps to 3.59%, while the yield on the 30-year Treasury bond firmed 5 bps to 4.49%.

Meanwhile, the CDX Series 13 North American high-grade index eased 3 bps to 88 bps on Thursday, a market source reported.

According to one source, overall Trace volume in high-grade trading rose about 7% to more than $14 billion.

In the secondary markets, trading was strong in Nissan Motor Acceptance Corp., which tightened on Thursday, while Morgan Stanley, Goldman Sachs & Co. and the financial sector overall widened out, sources said.

Morgan Stanley prices two tranches

Morgan Stanley priced $4 billion of notes in two tranches, in a deal that was announced by late morning and priced by mid-afternoon.

The sale comes one day after the financial services company announced that it posted a $413 million profit for the fourth quarter of 2009, which fell below analyst forecasts.

A tranche of $2 billion in 4.1% five-year notes were sold at a spread of Treasuries plus 175 bps.

A $2 billion tranche of 5.5% 10-year notes priced at 190 bps over Treasuries.

Spreads on the deal were slightly higher than where they were initially launched, a source said. Each was increased by 10 bps.

Morgan Stanley was bookrunner for the deal from the New York City-based issuer.

Digital Realty prices tight to talk

Digital Realty Trust sold $500 million of 5.875% 10-year senior unsecured notes in late afternoon at 250 bps over Treasuries, a source close to the deal said.

Price talk was initially in the high 200 bps area, he said, but bookrunners were able to bring it down so it priced at a tighter level.

The size of the sale was initially talked at $350 million, the source said, adding that it wasn't officially upsized.

The deal was priced under Rule 144A and Regulation S.

Bank of America Merrill Lynch and Citigroup Global Markets were on the books.

Proceeds are being used temporarily to repay all or a portion of borrowings under a revolving credit facility, to acquire additional properties, fund development and redevelopment opportunities and for general corporate purposes.

The deal is guaranteed by parent company Digital Realty Trust Inc.

The real estate investment trust is based in San Francisco.

EDF prices $2.25 billion

Electricite de France sold $2.25 billion of notes late in the afternoon in two tranches.

A $1.4 billion tranche of 4.6% 10-year notes priced at a spread of 105 bps over Treasuries.

The $850 million tranche of 5.6% 30-year bonds were sold at Treasuries plus 115 bps.

The deal was done via Rule 144A.

Bank of America Merrill Lynch, Credit Suisse Securities and J.P. Morgan Securities were bookrunners.

The utility company is based in Paris, France.

Mixed headlines impact market

It was a good news, bad news sort of day in the investment-grade bond market, sources said. The good news came first in the morning, as Goldman Sachs beat expectations and announced a record profit of $13.4 billion for 2009. The financial services company made $4.9 billion in the fourth quarter.

After the announcement, more deals were dumped into the market, including those from EDF and Nordea Bank.

"Things were looking really good," a market source said.

By the end of the day, the Dow was down more than 200 points, mostly due to an announcement by president Obama about proposed changes to bank regulations.

"I don't think the president coming on [TV] helped anybody," a syndicate source said.

The regulations would limit the size and scope of banks. This would include prohibitions on what bank holdings companies can do, and limit their consolidation into mega-banks. It would be called the Volcker Rule, after the former Federal Reserve chairman.

The proposal was not met with open arms by the financial industry.

"Tomorrow should be an interesting day to see how the market responds," the syndicate source said.

There is little in the way of new deals planned for Friday, so any impact on the high-grade primary may be hard to discern.

"I don't think there's much coming up," a market source said. "After today, I don't think anyone will rush to the market [on Friday]."

Westpac offers three-years

Westpac Securities NZ priced $500 million of 2.625% three-year notes early in the day at 120 bps over Treasuries, a source away from the deal said.

The deal was done under Rule 144A. Market sources said they were surprised the deal did not price during the day on Wednesday - the session the sale was announced.

Goldman Sachs & Co. ran the books.

The unit of financial services company Westpac New Zealand Ltd. is based in Auckland, New Zealand.

Nordea prices $1.25 billion

Nordea Bank priced $1.25 billion of 4.875% 10-year notes late in the day at Treasuries plus 135 bps, a source away from the sale said.

They were sold under Rule 144A.

Bank of America Merrill Lynch, Goldman Sachs & Co. and J.P. Morgan Securities ran the books.

The financial services company is based in Stockholm, Sweden.

Validus sells bonds after going overnight

Validus Holdings priced $250 million of 8.875% 30-year senior unsecured notes to yield 9%, an informed source said.

The deal went overnight from Wednesday.

The notes priced at a spread of Treasuries plus 449.8 bps.

Goldman Sachs & Co., Deutsche Bank Securities and J.P. Morgan Securities were bookrunners.

Proceeds will be used for general corporate purposes.

The issuer provides reinsurance and insurance through subsidiaries and is based in Bermuda.

Morgan Stanley widens

In the secondary, financials performed porrly.

Morgan Stanley's $4 billion of notes were seen widening late in the market session on Thursday.

"The five-years are at 179, 175. The 179 bid just hit on those," a trader said.

The 4.1% notes due 2015 priced earlier in the day at Treasuries plus 175 bps.

The notes due 2020 were seen at 195 bps bid, 191 bps offered, the trader said. The 5.5% notes priced at Treasuries plus 190 bps.

"These big financials all got hit with the president making the comments he's making about limiting proprietary trading," one trader said about the sector on Thursday. "Regionals did well. The big guys got beat up. The spread widened by about 14 basis points."

Goldman Sachs moves out 10 bps

Also on Thursday, Goldman Sachs reported fourth-quarter earnings of $4.95 billion, or $8.20 a share - versus Wall Street's expectations of $5.20 a share.

In the secondary market, New York-based Goldman's 7.5% notes due 2019 were seen at 157 bps.

"Goldman Sachs widened out at least 10, 15 basis points," the trader said.

Financial CDS wider on Obama speech

A trader who watches the credit-default swaps market said that the cost of insuring holders of big-bank or major brokerage house paper against a possible default widened substantially on Thursday, in line with widening cash spreads and falling stock prices in those names in the wake of president Obama's call for sweeping new restrictions on the financial industry, reflecting investor concerns about the sector.

He saw bank paper CDS costs anywhere from 5 bps to 20 bps wider, with J.P. Morgan Chase & Co. 20 bps wider at 59 bps bid, 69 bps offered.

He also saw brokerage-name CDS costs gap out by between 5 bps and 23 bps, with Goldman Sachs Group 23 bps wider at 115 bps bid, 125 bps offered, Merrill Lynch & Co. also out by 23 bps at 130 bps bid, 140 bps offered, and Morgan Stanley 15 bps wider at 133 bps bid, 143 bps offered.

Electricite de France active

Electricite de France's notes were active in secondary trading after $2.25 billion in two tranches priced on Thursday.

According to one trader, the notes due 2020 were seen at 112 bps bid, 103 bps offered.

The 10-year notes priced at Treasuries plus 105 bps.

Also, the bonds due 2040, which priced at Treasuries plus 115 bps, were trading near the market's close at 120 bps bid, 110 bps offered, the trader said.

Nissan Acceptance firms

Nissan Motor Acceptance's new notes tightened in secondary trading on Thursday.

The 3.25% notes due 2013 were seen at "182 bid, 177 offered," a trader said.

The 3.25% notes priced on Wednesday at Treasuries plus 195 bps.

In addition, Nissan Motor's 4.5% notes due 2015 also firmed to 210 bps bid, 205 bps offered. The notes priced at Treasuries plus 220 bps.

The Irving, Texas-based company is the financing and leasing company for Nissan vehicles.

-Paul Deckelman contributed to this report

© 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.