WALL STREET-Pent-up demand for new issuance made for strong investor demand for the newly issued NCUA Guaranteed Notes (NGNs), a debt offering that is part of the agency's plan to restructure the corporate credit union system.
"The demand was tremendous," said Brian Wiele, managing director 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.
The NGNs are designed to allow NCUA's Asset Management Estate to hold onto the legacy assets of the five conserved corporates-U.S. Central, WesCorp FCU, Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU-to maturity so they have a chance to regain some value before they have to be sold off, thereby mitigating the losses if those assets had to be sold immediately.
"A tremendous effort was put into the pre-marketing, not only of this transaction, but also the program as a whole," Wiele said 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 similar to the 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%.
NCUA was expected to launch a second sale of the bonds shortly after the first sale. The second offering will include assets of WesCorp, the one-time $34 billion corporate that was taken over along with U.S. Central by NCUA in March 2009, according to sources familiar with the deal. As many as 10 more offerings totaling as much as $35 billion are expected to be launched over the next five months, Barclays said.
