Nordea's CoCo takes limelight in busy high-grade market

By Mike Gambale and Danielle Robinson

NEW YORK, Sept 16 (IFR) - European bank CoCos are taking the US dollar market by storm, with Nordea coming on Tuesday with a two-tranche deal that attracted US$11bn of demand.

The transaction is the first Additional Tier 1 from a Swedish bank, and rides on the coat-tails of HSBC's blowout US$3.7bn offering of perpetual non-call fives and perpNC10s last Wednesday that attracted US$21.8bn of demand.

Like HSBC, Nordea priced perpNC5s and perpNC10s, respectively sized at US$1bn and US$500m.

The trade brought deal volume to US$8.2bn on a day when investors were fueling up with paper in expectation that Wednesday will be slow.

"Most issuers wanted to print today before the Fed's press conference tomorrow, due to uncertainty of when rates will begin to rise," said one syndicate manager.

Many of today's deals had well-oversubscribed books.

Health-care company Humana (NYSE: HUM - news) attracted a book of US$6bn for a US$1.75bn offering of fives, 10s and 30-year bonds.

Smaller deals were also swamped with orders, with Realty Income Corp's US$250m 12-year attracting US$1bn of demand and Gulf Power (Other OTC: GLFPO - news) 's US$200m 30-year deal getting over US$2bn of interest.

Royal Bank of Canada (Toronto: RY-PC.TO - news) added to the recent flurry of US covered bonds in September with a US$1.75bn 2.2% five-year covered.

The deal is RBC's first dollar covered this year and follows two other five-year offerings earlier in September from Bank of Nova Scotia and National Australia Bank.

The deal was priced at MS+27bp or T+43.7bp, 2bp inside of the MS+29bp that BNS priced its own 2.125% 2019 covereds on September 4.

Although it priced tighter than what BNS paid, RBC offered investors a slight 2bp pickup over BNS's trading levels of around MS+25bp.

The deal attracted US$2bn of demand and was trading slightly tighter in the grey market at T+42.5bp/T+41.5bp.

RBC's deal brings the number of dollar covereds this year to a grand total of five, with Westpac breaking the drought in mid-May followed by CBA in early June.

The day's focus, however, was on Nordea, whose pricing on its US$1bn 5.5% perpNC5 and US$500m 6.125% perpNC10 bonds demonstrated positive momentum for AT1 trades.

At those coupons, the Nordea deal would be the most tightly priced European bank Coco in the Yankee market yet, trumping the 5.625% and 6.375% paid by HSBC on its perpNC5 and perpNC10 Additional Tier 1 tranches last week.

The Nordea pricing was also on top of where HSBC's non-call fives and 10s were trading.

The US$11bn book enabled bookrunners to ratchet in pricing from price talk of 5.625% on the non-call five and 6.25% on the non-call 10.

Initial price thoughts had been set in the area of 5.75% and 6.5% on the respective tranches.

"The fact that Nordea priced tighter than where HSBC priced and is coming basically flat to where HSBC is now trading is very positive for the AT1 market," said a syndicate manager of Financial Institutions Group (FIG) borrowers.

"It shows that pricing is getting better, at least in dollars, for high quality banks."

Nordea bumped up the size on the NC5 because of the greater flexibility a shorter call date provides an issuer, as well as for the lower cost.

By keeping the 10-year half the size in a US market that tends to favor non-call 10s gave Nordea huge pricing leverage on the longer-dated AT1, and it probably would have paid more on the perpNC10 if it was larger.

NORDEA BANK AB (Other OTC: NRBAY - news)

Nordea Bank AB (NDASS), exp instrument BBB+/BBB, issuer rating Aa3/AA-/AA-, announced a US$ benchmark 144A/Reg S 2-part additional tier 1 subordinated unsecured notes that include a perpetual NC5 (9/2019) and NC10 (9/2024). The bookrunners include Bank of America, Citigroup (NYSE: C - news) , Goldman Sachs (NYSE: GS-PB - news) and UBS (NYSEArca: FBGX - news) . Interest Rate Reset: Fixed until the First Reset Date, reset every 5 years thereafter (non-step) to the sum of the relevant mid-swap rate and the margin.

Trigger Event: The CET1 Ratio of Nordea Bank AB (publ) on a solo basis or Nordea Group on a consolidated basis is less than the Trigger Level on such date. Trigger Level: 8% Nordea Group (Nordea Bank AB (publ) and its subsidiaries), 5.125% Nordea Bank AB (publ). Settle: T+5.

IPTS: NC5 5.75% area, NC10 6.50% area

PRICE GUIDANCE: NC5 5.625% area, NC10 6.25%. Area is +/- 12.5bp.

LAUNCH: US$1.5bn 2-part. US$1bn NC5 at 5.50%, US$500m NC10 at 6.125%.

PRICED: US$1.5bn 2-part total.

- US$1bn 5.50% perp NC5 (call 9/23/2019). At 100, yld 5.50%. Reset spread: swaps+356bp. 1st pay: 3/23/2015.

- US$500m 6.125% perp NC10 (call 9/23/2024). At 100, yld 6.125%. Reset spread: swaps+339bp.1st pay: 3/23/2015.

BOOK: US$11bn

NIC (NasdaqGS: EGOV - news) : flat

COMPS:

HSBC 4.250% March 14, 2024 at a bid of 141bp

ROYAL BANK OF CANADA

Royal Bank of Canada, Aaa/AAA/AAA, announced a SEC-Reg USD benchmark 5-year soft bullet via Royal Bank of Canada, Citigroup and TD Securities. Guarantor RBC Covered bond guarantor limited partnership. Settlement date T+5.

IPTs: Midswaps+high 20s

PRICE GUIDANCE: MS+27bp (the #)

LAUNCH: US$1.75bn at MS+27bp

PRICED: US$1.75bn 2.20% 5-year (9/23/2019). At 99.986, yld 2.203%. T+43.7bp. MS+27bp.

BOOKS: US$2bn

NIC: flat to 2bp

COMPS:

BNS (Aaa/AAA/AAA) 2.125% September 11, 2019 at M/S+29bp

HUMANA INC

Humana Inc (HUM), Baa3/BBB+/BBB, announced a US$ benchmark SEC registered 3-part offering that include 5-year (10/01/2019), 10-year (10/01/2024) and 30-year (10/01/2044) senior note offering. The notes contain a 101% put upon a CoC, a MWC, and a 3-month par call on the 10-year tranche and a 6-month par call on the 30-year tranche. The active bookrunners include Bank of America, Barclays (LSE: BARC.L - news) , JP Morgan and Wells Fargo.

UOP: To redeem US$500m aggregate principal amount of 6.45% senior notes due June 1, 2016, to repurchase shares of common stock pursuant to existing share repurchase authorization or future authorizations and for general corporate purposes. Settle: T+3 (9/19/2014).

IPTs: 5-year +100bp area, 10-year +135bp area, 30-year +170bp area

PRICE GUIDANCE: 5-year T+85bp (the #), 10-year T+130bp (+/- 3bp), 30-year T+165bp area (+/- 3bp)

LAUNCH: US$1.75bn 3-part. US$400m 5-year at T+85bp, US$600m 10-year at T+127bp, US$750m 30-year at T+162bp.

PRICED: US$1.75bn 3-part total.

- US$400m 2.625% 5-year (10/01/19). At 99.995, yld 2.626%. T+85bp. MWC+15bp. 1st pay: 4/01/15.

- US$600m 3.85% 10-year (10/01/24). At 99.867, yld 3.866%. T+127bp. MWC+20bp. 1st pay: 4/01/15.

- US$750m 4.95% 30-year (10/01/44). At 99.518, yld 4.981%. T+162bp. MWC+25bp. 1st pay: 4/01/15.

BOOKS: US$6bn total. 5-year: US$2.5bn, 10-year: US$1.7bn, 30-year: US$1.8bn

NIC: 5-year: 2bp (Subtract 5bp for high dollar priced, brining fair value to G+83bp)

10-year: 20bp

30-year: 14bp

COMPS:

7.200% June 15, 2018 at G+88bp (US$117)

3.150% December 1, 2022 at G+107bp

4.625% December 1, 2042 at T+148bp

REALTY INCOME CORP

Realty Income Corporation (NYSE: O - news) (O), Baa1/BBB+/BBB+, announced a US$250m (no grow) SEC registered 12-year (10/15/2026) senior unsecured notes. The notes contain a make-whole call and a 3-month par call. The active bookrunners include Bank of America, Citigroup, Royal Bank of Canada, US Bank and Wells Fargo, with passive bookrunners include Bank of New York, JP Morgan (Other OTC: MGHL - news) and Regions.

UOP: To pay accrued but unpaid dividends on the Class E preferred stock to redeem all of the outstanding shares of Class E preferred stock. The remaining net proceeds will be used to repay a portion of the borrowings outstanding under the acquisition credit facility and, to the extent not used for the foregoing purposes, for other general corporate purposes and working capital, which may include acquisitions. Settle: T+5 (9/23/2014).

IPTs: T+175-180bp

PRICE GUIDANCE: T+165bp area (+/-5bp)

LAUNCH: US$250m at T+160bp. Pricing around 2pm ET.

PRICED: US$250m 4.125% 12-year (10/15/2026). At 99.499, yld 4.178%. T+160bp. MWC+25bp. 1st pay: 4/15/2015.

BOOKS: US$1bn

NIC: 4bp (add 20bp for 2-year maturity differential, bringing fair value to G+156bp)

COMPS:

4.650% August 1, 2023 at G+134bp (US$106.48)

3.875% July 15, 2024 at G+136bp

WPP FINANCE

WPP Finance SA (WPPLN), Baa2/BBB/BBB+ (s/s/s), announced a US$600m 10-year (9/19/2024) senior unsecured SEC-Reg (Madrid: SL001.MC - news) notes via JP Morgan, Citigroup, Goldman Sachs, HSBC and Wells Fargo. The notes are guaranteed WPP plc (LSE: WPP.L - news) , WPP Jubilee Limited and WPP 2005 Limited.

The notes also contain a US$101 COC put and a MWC. UOP: GCP, which includes the repayment of short term borrowings which have partly arisen from the repayment of bonds which matured earlier in the year. Settle: T+3 (9/19/2014).

IPT: T+145bp area

PRICE GUIDANCE: T+140bp area (+/-5)

LAUNCH: US$750m 10-year at T+140bp

PRICED: US$750m. Cpn 3.75%. Due 9/19/2024. Ip USD98.029. Yld 3.991%. T+140bp. MWC T+20bp.

BOOKS: US$1.9bn

NIC: 11bp

COMPS:

3.625% September 7, 2022 at G+129bp

GULF POWER COMPANY (NYSE: GUA - news)

Gulf Power Company, A2/A/A (s/n/s), announced a US$200m (no grow) SEC-Reg 30-year (10/1/2044) senior unsecured notes via Royal Bank of Scotland (LSE: RBS.L - news) , Goldman Sachs and Scotia. Co-managers are CASTLE/RAMIREZ. Make-whole call applies along with a par call 6-months prior to maturity.

UOP: Repay at maturity US$75m aggregate principal amount outstanding of the Company's Series K 4.90% Senior Notes due October 1, 2014, to repay a portion of its outstanding short-term indebtedness, which aggregated approximately and for general corporate purposes.

IPT: low to mid 130s

PRICE GUIDANCE: T+125bp area (+/-3bp).

LAUNCH: US$200m at T+122bp

PRICED: US$200m 4.55% 30-year (10/01/2044). At 99.804, yld 4.562%. T+122bp.

BOOKS: North of US$2bn

NIC: flat

COMPS:

5.100% October 1, 2040 at T+122bp

ANZ NEW ZEALAND

ANZ New Zealand International Ltd (acting through its London branch (ANZNIL), Aa3/AA-/AA- (s/s/s), announced a US$ benchmark senior unsecured note offering via ANZ, Citigroup and JP Morgan for a fixed-rate 5-year senior unsecured 144a/Reg S benchmark bond. Settlement date T+5.

IPT: T+90bp area

PRICE GUIDANCE: T+87.5bp area (+/-2.5bp).

LAUNCH: US$500m at T+85bp

PRICED: US$500m 2.60% 5-year (9/23/2019). At 99.935, yld 2.614%. T+85bp.

BOOKS: US$1.lbn

NIC: 7bp

COMPS:

BNZ (Aa3/AA-/AA-) 2.350% March 4, 2019 at G+78bp

ANZ (Aa2/AA-/AA-) 2.300% September 6, 2019 at G+62bp

PENNANTPARK INVESTMENT CORP

PennantPark Investment Corporation (PNNT), Nr/BBB-/BBB-, announced a US$250m SEC-Reg 5-year unsecured note offering via JP Morgan, Goldman Sachs, Morgan Stanley (Xetra: 885836 - news) and Suntrust. UOP: To repay debt. Settlement date T+5.

IPTs: High 200s (T+275-287.5bp)

LAUNCH: US$250m at T+275bp

PRICED: US$250m 4.5% 5-year (10/01/2019). At 99.905, yld 4.521%. T+275bp. MWC+45bp.

BOOKS: US$350m

NIC: Debut offering

TURK EXIM

Demand for Turk Exim's US$500m seven-year Reg S/144A bond is more than US$750m, according to a source, ahead of the US open. Barclays, Citigroup, JP Morgan, Mitsubishi and Mizuho are the leads.

IPT: M/S+287.5-300bp

LAUNCH: US$500m at M/S+275bp

PRICED: US$500m. Cpn 5.00%. Due 9/23/21. Ip US$99.493. Yld 5.087%. M/S+275bp

BOOKS: US$750m

CORPBANCA

Chilean lender CorpBanca (Baa3/BBB by Moody's/Fitch) has announced a new five-year 144A/Reg S senior unsecured US dollar benchmark deal via Bank of America Merrill Lynch, HSBC and Standard Chartered (HKSE: 2888.HK - news) . UOP: GCP, primarily to fund lending activities.

IPTs T+235bp area

PRICE GUIDANCE: T+225p area (+/-5bp)

LAUNCH: US$750m at T+225bp

PRICED: US$750m 2019 at 99.340; C: 3.875% Y: 4.022%; S: T+225bp

BOOKS: US$2.5bn

NIC: 10bp (add 15bp for curve differential, bringing fair value to G+215bp

COMPS:

CORPB 3.125% January 15, 2018 at G+200bp (Reporting by Mike Gambale, Danielle Robinson; Editing by Shankar Ramakrishnan and Marc Carnegie)