Alabama Power prices as primary cools; industrials, financials wider in trading, AT&T firms

By Andrea Heisinger and Cristal Cody

New York, March 3 - Alabama Power Co. was the sole issuer on Thursday as companies put the brakes on the flow of new deals.

The unit of Southern Co. priced $250 million of 30-year bonds in a quick sale that was done by early afternoon.

A sale of $250 million of 10-year senior notes by Old Republic International Corp. that was announced on Wednesday was scrapped after the company instead doubled the size of a concurrent sale of convertible senior notes due 2018.

According to an FWP with the Securities and Exchange Commission, the issuer determined not to proceed with its previously announced offering of $250 million principal amount of senior notes. The sale was dropped on Wednesday night, a source added.

There was nothing particularly bad about the market tone for the day, but most of the week's sales came out on Monday, Tuesday or Wednesday, a source said.

Issuance is likely done for the week.

"I have from everyone out there that there's nothing tomorrow," a syndicate source said. "It's all next week's business."

Another source said it was too soon to tell whether the coming week would be more or less busy than the past one.

Overall investment-grade Trace volume edged up slightly to $14.8 billion, a source said.

Alabama Power's new bonds firmed in the secondary market, a source said. Trading was stronger in the telecommunications sector, while industrials weakened and financials widened 1 bp to 2 bps on the short end, according to sources.

Dallas-based AT&T, Inc.'s 5.8% notes due 2019 firmed to 55 bps from 61 bps the previous day, a source said.

The Markit CDX Series 14 North American investment-grade index also firmed 2 bps to a spread of 82 bps, according to Markit Group Ltd.

Treasuries sold off on Thursday, sending yields up on a solution in Libya and stronger economic data ahead of the government's monthly labor report. The 10-year Treasury benchmark note yield rose 10 basis points before ending the day at 3.55% from 3.47%. The 30-year bond yield rose 6 bps to 4.62%.

Bonds fell after the Labor Department said that initial jobless claims fell 20,000 to 368,000 for the week ended Feb. 26, the lowest level since 2008. In other data, the Institute for Supply Management's survey on service sector activity for February was 59.7 in February, up from 59.4 and higher than estimates of 59.0.

"It was certainly a very good jobless claims number and there's nervousness before tomorrow's nonfarm payroll number given the big drop in jobless claims," said Mary Ann Hurley, a fixed-income trader for D.A. Davidson & Co. "If it's a real strong report, depending on where the jobs are added or not subtracted, we could see 10s get back up to a 3.65%."

Alabama Power's long bond

Southern Co. electric subsidiary Alabama Power priced $250 million of 5.5% 30-year series 2011A senior notes (A2/A/A+) by early afternoon to yield Treasuries plus 90 bps, an informed source said in early afternoon.

The notes were sold at the tight end of guidance in the range of 90 bps to 92 bps, a source said.

The sale was roughly three times oversubscribed with about $750 million on the books, he said.

"It was pretty straight down the fairway," he added, referring to the deal.

J.P. Morgan Securities LLC, Morgan Stanley & Co., Inc., SunTrust Robinson Humphrey Inc. and Wells Fargo Securities LLC were bookrunners.

Proceeds are being used for general corporate purposes, including the company's continuous construction program.

Alabama Power's bonds traded stronger in the secondary market, firming to 87 bps bid, 81 bps offered, a trader said.

The electric subsidiary of the Southern Co. is based in Birmingham.

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