Financials head onslaught in high-grade market

By Danielle Robinson

NEW YORK, Sept 2 (IFR) - Financial issuers are leading a 14-deal flood of issuance in the US high grade market on Monday, by offering seven deals in 15 different tranches.

Investors could not recall a busier day for bank issuance, and attributed the onslaught to a stampede by banks and corporates alike to get deals done while the going looks good.

"A lot of this is seasonally driven, with borrowers getting past the summer holidays and wanting to get through a narrow window before earnings blackout," said one head of debt capital markets.

"And some of it is just human nature - we have heard from more than one borrower they have one trade to do between now and the end of the year and were looking to get it done as soon as possible."

The book build has started slowly as syndicate desks discover who is back at their desk, but expectations are that all of the offerings will be in good shape by the end of the day.

"Investors have had inflows and some were wharehousing liquidity in August in anticipation of a very busy September," said one banker.

"There are a fair amount of names, but not a lot of risk," added a portfolio manager. "These are mostly short maturities that will be well absorbed by shorter duration investors."

The corporate standouts are Marathon Petroleum Corp and Packaging Corp of America, which have both decided to take acquisition financing risk off the table ahead of an expected avalanche of M&A related deals in weeks to come.

But the focus is primarily on the banks, which look set to rule this week's issuance.

"We expected September to be very busy with more than US$100bn of deals and the banks coming first," said the DCM head.

"That's what you've seen today and will probably see again tomorrow, and then next week will be dominated by corporates."

European Yankee banks are particularly anxious to get their deals done ahead of the mid-October Asset Quality Review by regulators.

HSBC has announced a roadshow, beginning Thursday of its inaugural Additional Tier 1 Coco, which is sure to be swamped with orders globally, given the quality of the issuer and the rarity of the deal.

The bank has US$16bn worth of Tier 1 capital outstanding, of which US$14bn is eligible for grandfathering, leaving US$2bn that will need to be replaced as it amortises by 2021.

Lloyds, meanwhile, dived in to the Yankee market on Monday with a five-year senior unsecured offering, its first since November last year and led by Bank of America Merrill Lynch, Citigroup (NYSE: C - news) , Deutsche Bank (Xetra: 514000 - news) , Lloyds and Wells Fargo Securities.

Bank of Tokyo Mitsubishi UFJ is taking advantage of attractive swap spreads to place three-year fixed and floating rate securities as well as five, seven and 10-year fixed rate notes via BAML, Citi, MUFJ and Morgan Stanley (Xetra: 885836 - news) .

National Australia Bank is providing a much needed injection of life into the US dollar covered bond market, with a five-year note led by BAML, HSBC,NAB, Royal Bank of Canada (Toronto: RY-PC.TO - news) and Toronto Dominion Securities.

Bank of America has weighed in with a two-part hit on the institutional and retail perpetual preferred markets to lock in attractive Tier 1 pricing after an extraordinary rally in rates in recent weeks.

Its self-led offerings include a perpetual non-call 10-year preferred fixed to floating rate note for institutional investors, and a fixed for life perpetual non-call five preferred in US$25 par format for retail investors.

Fifth Third Bank and Capital One, meanwhile, are issuing bonds at the bank level in order to mitigate the costs of FDIC insurance.

FITB's seven-year deal is a US$500m offering led by DB, FITB and Goldman Sachs (NYSE: GS-PB - news) and whispered in the mid to high 90s, while COF has broken its deal into a three and a five-year led by Barclays (LSE: BARC.L - news) , Citi, Credit Suisse (NYSE: CS - news) and GS (KSE: 078935.KS - news) . (Reporting By Danielle Robinson; editing by Shankar Ramakrishnan)