NCUA’s Corporate Bonds Sold Fast

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WALL STREET – Pent-up demand for new issuance made for strong investor demand for the newly issued NCUA Guaranteed Notes, a blend of $3.8 billion of bonds secured by the assets of U.S. Central FCU.

“The demand was tremendous,” said Brian Wiele, managing director on the syndicate desk at Barclays Capital, the main underwriter of the deal. Wiele said there was as much as $15 billion to $20 billion of demand for the notes. The bonds were marketed to asset managers in the U.S. and in Europe and Asia, according to Wiele.

NCUA hopes to repackage and sell off the assets of U.S. Central and the other four corporate failures, WesCorp FCU, Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU, and last week’s initial sale was a test run.

“A tremendous effort was put into the pre-marketing, not only of this transaction, but also the program as a whole,” Wiele told Credit Union Journal yesterday, of plans to sell as much as $35 billion of bonds backed by corporate assets by the end of the first quarter.

The NCUA notes were structured like bonds issued by the FDIC in recent months that were backed by assets of failed banks. While both bonds carry the backing of the full faith and credit of the U.S. government, the spreads on the NCUA bonds were somewhat tighter, by about 5 basis points on the floating-rate tranche and about 25 bps on the fixed-rate bonds. The NCUA bonds carry a final maturity of 10 years, meaning the bonds cannot be called before then.

The initial offering included $3.28 billion of floating-rate bonds sold at Libor plus 45 bps; and $566.5 million worth of fixed-rate bonds yielding 1.85%.

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