Capital One sells trust preferreds, trade up, Macquarie plans deal; spreads ease; Nexen slips

By Andrea Heisinger and Paul Deckelman

New York, July 29 - A split-rated preferred deal from Capital One Capital V was about the only action in the high-grade market Wednesday, sources said, as a summer slowdown takes hold.

A Rule 144A sale from Macquarie Group Ltd. was announced early in the day, but pricing was delayed until Thursday to allow more investors in, a source close to the deal said.

The slowdown could have a brief respite in the coming week, a market source said, although any pick up in activity may not last.

Among the established issues in the secondary arena on Wednesday, a market source said the CDX Series 12 North American high-grade index held steady at a mid bid-asked spread level of 116 bps.

Advancing issues - which led decliners for a third straight session on Tuesday - again dominated on Wednesday, by a nine-to-seven ratio.

Overall market activity, reflected in dollar-volume totals, rose about 3% from Tuesday's pace.

Spreads in general were seen a little wider, in line with slightly lower Treasury yields; for instance, the yield on the benchmark 10-year issue narrowed about 2 bps on Wednesday to 3.66%.

Monday's new issues from Nexen Inc. and Northrop Grumman Corp. were seen having backed up a little, although they all remain tighter versus their respective pricing spreads.

Capital One sells trust preferreds

An issuing entity of Capital One Financial Corp., Capital One Capital, sold $1 billion split-rated 10.25% 30-year cumulative trust preferred securities to yield 10.375%, a market source said.

The deal was doubled in size from the planned $500 million originally talked around the market.

Bookrunners were J.P. Morgan Securities, Banc of America Merrill Lynch and Morgan Stanley & Co. Inc.

The deal came off the high-grade desks, although with a split rating of Baa2/BB/BBB, it attracted attention from both junk and high-grade investors.

Proceeds will be used for general corporate purposes.

The banking and financial parent company is based in McLean, Va.

Macquarie plans five-year sale

Macquarie Group plans to sell $250 million of five-year notes, an informed source said Wednesday.

The notes will be priced via Rule 144A, and are expected to be done Thursday. The offering went overnight to allow Asian investors in on the offering, the source said.

Bookrunners are Banc of America Merrill Lynch, Citigroup Global Markets and J.P. Morgan Securities.

The financial services and banking company is based in Sydney, Australia.

Volume could see uptick

There could be a lull, however brief, in the summer slowdown that's expected to be in full effect for the month of August, a market source said late Wednesday.

The remainder of this week is expected to be slow, with syndicate desks reporting little in the way of solid deals.

The Macquarie sale was the "only firm thing in the market," for the rest of the week, a source said of his desk.

"I think it's pretty typical," another source said. "It's normally like this a lot earlier [in the summer]."

With more companies emerging from earnings, this lull could subside in the coming week.

"We could start to be busy next week, although August is typically slow," the source said. "We're kind of in a gray area right now."

The first source agreed, saying "We should see a few more things [next week], but nothing too major."

Nexen bonds ease off gains

A trader saw Nexen's recently priced bonds widening a little from the levels seen on Tuesday, although they remain tight versus the levels at which the Calgary, Alta.-based energy company priced its $1 billion of bonds on Monday in a two-part offering.

Its $300 million of 6.20% notes due 2019 were seen Tuesday at a spread versus comparable Treasury issues of 240 bps bid, 235 bps offered. That was a little wider than the 235 bps bid, 228 bps offered at which the bonds traded Monday in initial aftermarket dealings, and on Tuesday, but was still tighter than the 250 bps over level at which they had priced earlier Monday.

Its $700 million of 7.50% bonds due 2039, which had priced Monday at 290 bps over and then tightened to 275 bps bid, 270 bps offered, were seen Wednesday at 279 bps bid, 273 bps offered.

Northrop bonds also ease a little

The same held true for the bonds of Los Angeles-based aerospace company Northrop Grumman.

A trader saw its 3.70% notes due 2014 at 105 bps bid, 100 bps offered and its 5.05% notes due 2019 at 121 bps bid, 128 bps offered - both in slightly from the levels seen in Monday's aftermarket and again on Tuesday, but still tighter than the 115 bps over and 135 bps over levels, respectively, at which those two tranches had priced earlier Monday.

Capital One captivates market

A trader mentioned Capital One Capital V's new issue of 10¼% cumulative trust preferred certificates due 2039 as a busy issue on the day.

A trader quoted the securities as having traded up to around the 101 level from its issue price of 98.846.

He also saw several such existing hybrid issues trading actively - its Capital One Capital IV 6.745% trust preferreds due 2082 had been trading around 66 on Friday, and had moved to as high as 70½ on Wednesday, "though by the end of the day, it came in a little and traded back down" to end at 681/2.

A market source saw over $40 million having traded by mid-afternoon.

The trader also saw the company's Capital One Capital III 7.686% trust preferreds due 2066 get as good as 78, before going out at around 77 - still well up from around 72 at the beginning of last week, the most recent prior trading activity.

"So Capital One has done well."

Bank, brokerage CDS costs come down

A trader who watches the credit-default swaps market said that the cost of protecting a holder of big-bank bonds against a possible event of default, as well as brokerage company bonds, was 5 bps to 10 bps tighter across the board.

© 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.