Morgan Stanley brings four-part sale to lead modest week; Morgan Stanley's existing bonds mixed

By Aleesia Forni and Andrea Heisinger

New York, April 22 - A multi-tranche offering from Morgan Stanley started the week of investment-grade bond issuance with a bang.

The financial services company reported first-quarter earnings on April 18 and sold $3.65 billion in four parts in Monday's session. The company reported a drop in trading revenue in Q1, but earnings beat analyst expectations.

The preferred stock market saw Teekay Offshore Partners LP announce a minimum $140 million sale of series A cumulative redeemable shares.

Issuance for the week is expected to be between $10 billion and $15 billion, bolstered by large offerings from financials emerging from earnings blackouts, like Morgan Stanley.

"We're already a third of the way there!" one source said late Monday. "Should see some corporates tomorrow. We won't know until [the open]."

The source added that Treasury rates were higher to start the week. "There was some data today and more earnings announcements. [It was] pretty dead out there."

The secondary market saw existing notes from Morgan Stanley trading mixed on the day.

In other trading action, AutoZone, Inc.'s recently issued notes were quoted 1 basis point wider on Monday compared to Friday's levels, according to a market source.

Investment-grade bank and broker credit default swap costs declined on Monday, according to a market source.

Bank of America Corp.'s CDS costs were 4 bps tighter at 125 bps bid, 129 bps offered. Citigroup Inc.'s CDS costs declined 1 bp to 105 bps bid, 109 bps offered. JPMorgan Chase & Co.'s CDS costs were unchanged at 86 bps bid, 90 bps offered. Wells Fargo & Co.'s CDS costs were also flat at 71 bps bid, 75 bps offered.

Merrill Lynch's CDS costs were 4 bps tighter at 116 bps bid, 122 bps offered. Morgan Stanley's CDS costs declined 3 bps to 145 bps bid, 149 bps offered. Goldman Sachs Group, Inc.'s CDS costs tightned 2 bps to 129 bps bid, 133 bps offered.

Morgan Stanley's tranches

Morgan Stanley priced $3.65 billion of notes (Baa1/A-/A) in four parts during the day's session, according to a market source and FWP with the Securities and Exchange Commission.

A reopening of floating-rate notes due 2016 was said to be added prior to the launch due to investor interest. That $300 million of notes priced at 100.57 with a coupon of Libor plus 125 bps.

Total issuance is $1.05 billion, including $750 million sold at par on Feb. 20.

A reopening of 1.75% three-year notes was done to add $150 million. The new bonds sold at 100.651 with a spread of Treasuries plus 118 bps.

Total issuance is $1.4 billion, including $1.25 billion sold on Feb. 20 at Treasuries plus 140 bps.

There was a $700 million tranche of new five-year floating-rate notes priced at par to yield Libor plus 128 bps.

Finally, $2.5 billion of 2.125% five-year notes was sold with a spread of 145 bps over Treasuries.

Morgan Stanley & Co. LLC was bookrunner.

The New York City-based financial services company was last in the U.S. bond market with a $4.5 billion offering in two maturities on Feb. 20. That sale included a 1.75% three-year note sold at 140 bps over Treasuries.

Teekay preps preferreds

Teekay Offshore Partners intends to sell up to $140 million of series A cumulative redeemable preferred stock units, the company said in a filing with the SEC.

The Hamilton, Bermuda-based marine transportation company said it would sell up to $140 million of series A cumulative redeemable preferred stock units. A trader said there was no selling group and opined that pricing would come later in the day.

Early in Monday's session, he saw the issue bid at $24.60 in the gray market. The last bid he saw was $24.72, though with no offers.

BofA Merrill Lynch, Morgan Stanley & Co. Inc. and UBS Securities LLC are the joint bookrunning managers.

Teekay intends to list the securities on the New York Stock Exchange under the ticker symbol "TOOPA."

Proceeds will be used for general partnership purposes, including the funding of newbuilding installments, capital conversion projects and the acquisitions of vessels that Teekay Corp. has or might offer. Pending approval for such uses, the company may use the funds to pay down a portion of its revolving credit facilities.

Morgan Stanley mixed

The 5.625% notes from Morgan Stanley due 2019 firmed 1 bps on Monday, closing the session at 217 bps bid.

The bank sold $3 billion of the notes at 225 bps over Treasuries on Sept. 16, 2009.

Meanwhile, the bank's existing 7.25% notes due April 1, 2032 traded 7 bps wider at 127 bps bid.

AutoZone weaker

In recent deals, one trader quoted AutoZone's 3.125% notes due 2023 at 150 bps bid, 145 bps offered during Monday's session.

The notes priced at a spread of Treasuries plus 150 bps on Thursday.

AutoZone is a Memphis-based automotive parts retailer.

Stephanie N. Rotondo contributed to this review

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