Time Warner Cable, PG&E, Cleveland Electric do deals, some spreads inverted; issues mostly tighter

By Andrea Heisinger

New York, Nov. 13 - Time Warner Cable Inc., Pacific Gas and Electric Co. and Cleveland Electric Illuminating Co. priced new issues Thursday, feeding off the momentum of Wednesday's deals.

A continually poor economic outlook was again overshadowed by a dwindling window in which companies will be able to issue debt this year.

The secondary was busy trading Wednesday's deals. They were a mixed bag, with some spreads unchanged and others wider.

Time Warner prices $2 billion

Time Warner Cable, an offshoot of Time Warner Inc., priced $2 billion of five- and 10-year notes to fund a dividend payment stemming from the split with the parent company.

The $750 million of 8.25% notes due 2014 priced at 99.849 to yield 8.291%, or Treasuries plus 590 basis points.

The $1.25 billion of 8.75% notes due 2019 priced at 98.465 to yield 8.986%, or Treasuries plus 525 bps.

Price talk for the issue was a bit unorthodox, a source close to the deal said.

The 10-year notes were talked at the 537.5 bps area, with a window of 12.5 bps on either side. The five-year notes were talked 65 bps over the 10-year notes.

"We did that because we had an inverted curve and wanted to price [the 10-year notes] cheaper," the source said.

All in all, the issue went well, he said.

Citigroup Global Markets Inc., Deutsche Bank Securities, Goldman Sachs & Co. and Mizuho Securities USA Inc. ran the books.

PG&E prices, reopens

Pacific Gas and Electric priced two tranches, including a reopening of 10-year notes that originally were priced Oct. 16.

The $400 million of 6.25% five-year notes priced at 99.258 to yield 6.424%, or Treasuries plus 410 bps.

The utility reopened its 8.25% 10-year notes to add $200 million. Total issuance is now $800 million, including $600 million priced Oct. 16 at Treasuries plus 455.7 bps.

The reopened notes priced at 104.475 to yield 7.598%, or Treasuries plus 395 bps.

Both tranches priced slightly tighter than talk, which was in the 412.5 bps area for the five-year notes and the 400 bps area for the 10-year notes.

J.P. Morgan Securities Inc., RBS Greenwich Capital and Morgan Stanley & Co. Inc. ran the books.

Cleveland Electric does small deal

Cleveland Electric Illuminating priced $300 million 10-year first mortgage bonds at par to yield 8.875%, or Treasuries plus 513.6 bps.

JPMorgan, Credit Suisse and Morgan Stanley ran the books.

Tone doesn't scare issuers

The negative tone continued Thursday as the stock market was volatile and more recession talk was out.

This didn't frighten away some issuers, mostly because time is running out, sources said.

"We've been saying that there's going to be a time crunch," a source said. "It's kind of here."

A virtual two-month freeze on new issues made the backlog of companies waiting to price deals grow even larger than it was before Labor Day.

Companies are now realizing they have few remaining windows in which to issue in 2008, sources said.

"If market conditions are not horrible, we're probably going to see one or two issuers," a source said.

Names coming into the market have been heavy on utilities and well-known companies.

"That's what investors want," a source said. "That's why we haven't seen the low-B issuers."

It remains a day-to-day market, so the number of issuers Friday hinges on what things look like at the open, sources said.

Time Warner tightens

The two tranches of the Time Warner Cable deal were seen more than 20 bps tighter in the secondary late in the afternoon.

The 8.25% notes due 2014 were at 571 bps bid, 566 bps offered, in from the 590 bps price, a trader said.

The 8.75% notes due 2019 saw similar movement and were in about 20 to 25 bps, to 505 bps bid from the 525 bps price.

Duke Energy mixed

Duke Energy Carolinas, LLC's two-tranche issue from Wednesday was seen mixed in the secondary, a trader said.

The 5.75% five-year notes were at 344 bps bid, 339 bps offered, mostly unchanged from 345 bps pricing.

The 7% 10-year notes were quoted at 327 bps bid, 322 bps offered. This was slightly tighter than the 340 bps price level.

AT&T slightly tighter

A trader said the recent issue of 6.7% five-year bonds from AT&T Inc. was slightly tighter in late afternoon trading, at 434 bps bid from 437.5 bps pricing Wednesday.

Secondary volume up

The secondary was a bit busier Thursday, with the handful of new issues from Wednesday trading around.

There were no particular issuers that stood out in terms of trading volume, a trader said.

Bank, broker CDS mixed

A trader said late in the afternoon that banks were 2 bps to 8 bps wider, while broker CDS levels were 5 bps to 10 bps tighter.

Citi tops trading

Citigroup Inc.'s 8.4% perpetual bonds were seen at the top of trading volume early Thursday afternoon. The top trading names were heavy on the financial names.

An issue of 5.25% notes due 2011 from HSBC Finance Corp. was seen second in trading volume.

Verizon, AmEx biggest movers

Verizon Global Funding was seen as one of the day's big movers, with its 7.25% bonds due 2010 coming in more than 40 bps from a week ago.

Among those names seen wider was American Express, whose 5.25% notes due 2011 were more than 30 bps wider than last week.

This comes a day after the credit card company asked for $3.5 billion in funds from the government's bailout plan.

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