First Bank, Minneapolis, hit the capital markets on Monday with a $100 million issue of subordinated bank notes.

Proceeds of the 10-year issue will be used to refinance outstanding intercompany debt, said David Grandstrand, senior vice president.

The issue was priced to yield 6.12%, or 65 basis points over 10-year Treasury notes. Donaldson, Lufkin & Jenrette Securities Corp. was lead manager.

Mr. Grandstrand said the bank entered a swap agreement to pay a rate of around 40 to 45 basis points over the three-month London interbank offered rate, now 3.25%. The $125 million of intercompany debt carries a floating rate, but has a minimum rate of around 5.25%, he said.

He added that the bank's issue of $100 million of subordinated "step-up" notes earlier this month was also to refinance the outstanding debt.

Elsewhere in the capital markets, Bank of Nova Scotia is expected to raise $250 million of 15-year subordinated debt today.

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