Morgan Stanley, Goldman Sachs issue bonds; Vepco does add-on; Morgan Stanley, Goldman firm

By Aleesia Forni and Cristal Cody

Virginia Beach, Oct. 20 – Financial issuers led Monday’s primary session, with Morgan Stanley and Goldman Sachs Group Inc. among the names bringing $6.2 billion of new paper to the investment-grade market.

Morgan Stanley sold its $3 billion of 10-year notes at the tight end of initial price guidance, a source said, attracting an orderbook that was around two times oversubscribed.

Meanwhile, Goldman Sachs’ new $3 billion two-part trade also priced at the tight end of guidance on Monday.

In other primary happenings, Virginia Electric and Power Co. came to market with a $200 million add-on to its existing notes due 2044.

The preferred market saw Bank of America Corp. price a $1.4 billion offering of 6.5% series Z fixed-to-floating rate noncumulative perpetual preferreds.

The primary is expected to see an uptick in issuance this week following last week’s slower pace, which saw only $7 billion of supply.

“Things went pretty well today, so we should see some more activity this week,” a market source said.

KfW is among the names expected to price bonds soon, setting price talk for a planned issue of three-year notes on Monday.

Sources are calling for around $15 billion to $20 billion of high-grade supply for the week.

Investment-grade bonds headed out mostly unchanged to modestly tighter, according to market sources.

The Markit CDX North American Investment Grade series 23 index was flat at a spread of 70 basis points.

Morgan Stanley’s 3.7% notes due 2024 tightened 5 bps in aftermarket trading, a trader said.

Goldman Sachs’ 2.55% notes due 2019 firmed 4 bps in the secondary market, according to a trader.

In other new issue secondary activity, Vepco’s 4.45% notes due 2044 traded flat from where the notes priced, a trader said.

Goldman sells $3 billion

Goldman Sachs Group sold $3 billion of five-year senior notes (Baa1/A-/A) on Monday in fixed- and floating-rate tranches, a market source said.

The sale included $500 million of five-year floaters priced at par to yield Libor plus 102 bps.

Pricing was on top of talk.

A second tranche was $2.5 billion of 2.55% notes due 2019 priced at 99.795 to yield 2.594%, or Treasuries plus 120 bps.

The fixed-rate notes sold on top of talk, which had firmed from of initial guidance set in the Treasuries plus 125 bps to 130 bps area.

Goldman Sachs & Co. was the bookrunner.

Goldman Sachs’ 2.55% notes due 2019 tightened to 116 bps bid, 114 bps offered in aftermarket trading, a trader said.

The financial services company is based in New York City.

Morgan Stanley prices tight

Morgan Stanley priced $3 billion of 3.7% senior notes (Baa2/A-/A) due 2024 on Monday at Treasuries plus 155 bps, according to a market source and an FWP filed with the Securities and Exchange Commission.

The notes sold at the tight end of price guidance, which was set in the low-160 bps area over Treasuries.

Pricing was at 99.826 to yield 3.721%.

Morgan Stanley & Co. LLC was the bookrunner.

In the secondary market, Morgan Stanley’s 3.7% notes due 2024 firmed to 150 bps bid, 149 bps offered, a trader said.

The financial services company is based in New York City.

Vepco sells add-on

Also on Monday, Virginia Electric and Power sold a $200 million add-on to its existing 4.45% series B senior notes (A2/A-/A-) due Feb. 15, 2044 at Treasuries plus 105 bps, according to a market source and an FWP filed with the SEC.

Pricing was at 107.49 to yield 4.009%.

The original $400 million of 4.45% notes due 2044 priced at 90 bps over Treasuries on Feb. 4, 2014.

BNP Paribas Securities Corp. and Citigroup Global Markets Inc. were the bookrunners.

Proceeds will be used for general corporate purposes, to repay short-term debt and to offset the payment of the redemption price to be paid in connection with the redemption of all of its issued and outstanding preferred stock on Oct. 20.

Virginia Electric’s 4.45% notes due 2044 were quoted at 105 bps bid, 103 bps offered in secondary trading, according to a trader.

The electric utility is based in Richmond, Va.

KfW on deck

KfW (Aaa/AAA/AAA) set price talk for a planned three-year offering of bonds on Monday in the area of mid-swaps minus 6 bps, according to a market source.

The bookrunners are BNP Paribas Securities Corp., Credit Suisse Securities and Nomura.

The German government-owned development bank is based in Frankfurt.

Bank of America prices deal

Bank of America brought $1.4 billion of 6.5% $1,000-par series Z fixed-to-floating rate noncumulative preferred stock on Monday.

One trader quoted the new issue at 101 bid, 101.125 offered. Another market source said he saw a 100.75 bid for paper.

In the bank’s $25-par issues, most of them finished the day higher, but the most liquid issue – the 6.625% series W noncumulative preferreds (NYSE: BACPW) – traded off 12 cents to $25.16.

Dividends will be fixed until Oct. 23, 2024, at which point the rate will be Libor plus 417.4 bps.

While fixed, the dividend will be paid semiannually. Once floating, it will be paid quarterly.

The preferreds become redeemable Oct. 23, 2024 or upon certain events involving capital treatment at par plus accrued dividends.

BofA Merrill Lynch ran the books.

Proceeds will be used for general corporate purposes.

Bank of America is a Charlotte, N.C.-based banking institution.

Bank/brokerage CDS costs flat

Investment-grade bank and brokerage CDS prices were unchanged on Monday, according to a market source.

Bank of America’s CDS costs remained at 74 bps bid, 77 bps offered. Citigroup Inc.’s CDS costs were also unchanged at 74 bps bid, 77 bps offered. JPMorgan Chase & Co.’s CDS costs were flat at 59 bps bid, 62 bps offered. Wells Fargo & Co.’s CDS costs were unchanged at 46 bps bid, 51 bps offered.

Merrill Lynch’s CDS costs were unchanged at 77 bps bid, 80 bps offered. Morgan Stanley’s CDS costs ended flat at 84 bps bid, 87 bps offered. Goldman Sachs Group, Inc.’s CDS costs flat at 87 bps bid, 90 bps offered.

Stephanie N. Rotondo contributed to this review

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