Utilities American Water, Public Service, ConEd tap primary market; M&A funding deals eyed

By Cristal Cody

Tupelo, Miss., May 6 – Three utilities tapped the investment-grade primary market on Monday with $2.55 billion of notes.

American Water Capital Corp. sold $1.1 billion of senior notes in two tranches.

Public Service Electric & Gas Co. priced a $750 million two-part offering of secured medium-term notes.

Consolidated Edison Co. of New York, Inc. brought $700 million of 30-year debentures to the market.

Heavy volume is expected this week with the bulk of supply from an eight-part Rule 144A and Regulation S offering eyed to price early in the week from Bristol-Myers Squibb Co., according to market sources.

Bristol-Myers Squibb finished a two-day round of fixed income investor calls on Friday for the deal.

Proceeds will be used to help fund a portion of the funding costs of the company’s acquisition of Celgene Corp.

About $40 billion to $45 billion of new issuance is forecast by syndicate sources for the week.

Meanwhile, T-Mobile U.S. Inc.’s roadshow that started last week for an upcoming bond offering to fund its acquisition of Sprint Corp. continues through Wednesday in the U.S. and Europe markets.

Coming up on Tuesday, Fidelity National Information Services, Inc. will begin a roadshow and fixed investor calls for a multi-currency bond deal to help finance its acquisition of Worldpay Inc. The roadshow will continue through Friday.

“With 75% of high grade companies having reported 1Q19 earnings by now, the calendar should pick up going forward,” according to a BofA Merrill Lynch research note released on Monday.

The week of May 6 typically has $36 billion of average new issuance historically, according to the report.

Last week, high-grade issuers priced more than $23 billion of bonds, beating market forecasts of about $15 billion to $20 billion of supply.

The Markit CDX North American Investment Grade 32 index softened about 1 basis point during the session to a spread of 59 bps.

American Water prices $1.1 billion

American Water Capital sold $1.1 billion of senior notes (Baa1/A/) in two tranches on Monday, according to a market source and an FWP filing with the Securities and Exchange Commission.

The company priced $550 million of 3.45% 10-year notes at 99.779 to yield 3.476%, or a spread of 98 bps over Treasuries.

American Water Capital sold $550 million of 4.15% 30-year notes with a spread of Treasuries plus 128 bps. The notes priced at 99.47 to yield 4.181%.

Both tranches priced on the tight side of guidance.

J.P. Morgan Securities LLC, U.S. Bancorp Investments Inc., Wells Fargo Securities LLC, PNC Capital Markets LLC and RBC Capital Markets LLC were the bookrunners.

The investor-owned water and wastewater utility is based in Voorhees, N.J.

PSE&G prints two tranches

Public Service Electric & Gas priced $750 million of secured medium-term notes (Aa3/AA/A+) in two tranches on Monday, according to a market source and FWP filings with the SEC.

The company sold $375 million of 3.2% notes due May 15, 2029 at 99.609 to yield a spread of 75 basis points over Treasuries.

PSE&G priced $375 million of 3.85% notes due May 1, 2049 at 99.983 and a spread of Treasuries plus 95 bps.

The notes priced on the tight side of guidance.

Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Mizuho Securities USA Inc., TD Securities (USA) LLC, BNP Paribas Securities Corp. and RBC Capital Markets LLC were the lead managers.

PSE&G is a Newark, N.J.-based utility.

ConEd raises $700 million

Consolidated Edison Co. of New York sold $700 million of 4.125% 30-year debentures (A3/A-/A-) on Monday at a spread of Treasuries plus 122 bps, according to an FWP filing with the SEC.

The debentures priced at 99.965 to yield 4.127%.

Barclays, J.P. Morgan Securities, SMBC Nikko Securities America Inc., BNY Mellon Capital Markets LLC and U.S. Bancorp Investments were the bookrunners.

The electric utility is a subsidiary of New York City-based Consolidated Edison, Inc.

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