ConEd unit, Duke Energy Carolinas, Tanger Properties sell bonds; Transocean, BP bonds fall

By Andrea Heisinger

New York, June 2 - The high-grade new issue market came back to life on Wednesday with new bonds from Consolidated Edison Co. of New York, Inc., Duke Energy Carolinas, LLC and Tanger Properties LP.

Duke Energy Carolinas sold its $450 million of 10-year notes fairly early. The size was set from the beginning and did not grow, a source said.

ConEd Co. of New York's sale did grow, to $700 million from $600 million. It was split evenly between 10-year and 30-year tranches.

Tanger was the last to sell its upsized deal of $300 million of 10-year senior notes. The size was announced at $250 million.

The IG market's tone was improved from Tuesday, although companies were still approaching with caution. It's possible there will be a couple of new bonds priced on Thursday, although some may hold off until the coming week due to unemployment figures coming out on Friday.

"Some people don't like to price anything before those numbers come out," a source said.

The new notes from ConEd and Duke Energy were quoted as coming in between 5 basis points and 10 bps. This is a slight improvement from other recent new issues that were seen hovering around their pricing level or widening.

Treasuries overall were "worse because stocks were better," a trader in that sector said late in the day.

A big focus of the secondary was again on the "oil companies, oil services - they're all getting crushed," another source said.

Some bonds from BP Capital Markets plc and Transocean Inc. were trading at high volume, but also had worsened so much that they were being quoted at a dollar price instead of a spread.

Total volume was up for the day from the previous day. "I'm not sure why it was so dead yesterday, but it's picked back up today," a trader said.

The CDX Series 14 Investment Grade Index was quoted at 117, down from the previous day's quote of 122 bps.

ConEd sells upsized deal in two tranches

Consolidated Edison Co. of New York sold an upsized $700 million of debentures (A3/A-) split evenly between two tranches, a source close to the sale said.

The size was increased slightly from its initial $600 million.

The $350 million tranche of 4.45% 10-year notes priced at a spread of 115 bps over Treasuries. They priced at the tight end of talk in the 120 bps area, with a margin of plus or minus 5 bps.

A $350 million tranche of 5.7% 30-year bonds sold at 150 bps over Treasuries. They were talked in the 155 bps area, plus or minus 5 bps, and priced at the tight end of that.

There was around $3 billion in demand on the books for the sale, the source said.

Bookrunners were Bank of America Merrill Lynch, J.P. Morgan Securities, Morgan Stanley & Co. Inc. and Wells Fargo Securities.

Proceeds are being used for general corporate purposes, including repayment of short-term debt bearing interest at variable rates.

Both of the bonds improved in trading, with the 30-year tranche coming in slightly more than the 10-years.

Those notes due 2020 were quoted at 112 bps bid and 110 bps offered. They priced at 115 bps.

The 5.7% notes due 2040 were trading in 5 bps to 10 bps at 145 bps bid, 140 bps offered from their price of 150 bps.

The subsidiary of Consolidated Edison Inc. is based in New York City.

Tanger upsizes deal to $300 million

Tanger Properties sold an upsized $300 million of 6.125% 10-year senior unsecured notes (Baa2/BBB) at 287.5 bps over Treasuries, a source close to the sale said.

The size increased slightly from an original $250 million. They were priced at the tight end of guidance in the range of 287.5 bps to 300 bps, the source said.

There was north of $1 billion in demand on the books.

Bookrunners were Bank of America Merrill Lynch and Wells Fargo Securities.

Proceeds are being used to repay existing debt and to pay costs to terminate interest rate swap agreements associated with an unsecured term loan. The remainder will be used for general corporate purposes.

The Tanger notes were not seen trading - even in the gray, a trader said soon after pricing. "They just totally disappeared," they said.

The outlet center real estate investment trust is based in Greensboro, N.C.

High-grade bonds look up

A source who worked on two of the day's sales counted the tone as improved from previous days that have been dragged down by headlines.

Two of the sales - from Tanger and ConEd - were upsized slightly and came at the tight end of guidance.

"I guess utilities are safe, everyone figures, and I'm not sure why the REIT [Tanger] was [successful]," a source said.

Utilities have been some of the only issuers on recent days when others priced bonds at a premium. Those utility companies issued opportunistically in some cases, knowing they had a leg up on the competition.

The tone had improved slightly by the end of the day, with a syndicate source saying that "it looked good out there."

There's not likely to be a rush to issue for the remainder of the week, however, as there are still several landmines out there including the ongoing oil spill and worries about Europe's economic health.

"I think some [issuers] will hold down and see how today's deals perform," he said.

There's a possibility of deals on Thursday, with one source saying his desk had a couple of calls in the morning.

Duke Energy unit prices 10-year

Duke Energy Corp. subsidiary Duke Energy Carolinas priced $450 million of 4.3% 10-year first and refunding mortgage bonds (A1/A) early in the afternoon to yield Treasuries plus 100 bps, a source away from the sale said.

Bookrunners were Barclays Capital Inc. and J.P. Morgan Securities Inc.

The bond tightened once it hit the secondary for trading, a secondary source said. They quoted the 4.3% bond due 2020 at 92 bps bid, and 90 bps offered.

Proceeds are being used to fund capital expenditures for an ongoing construction program and for general corporate purposes.

The electric subsidiary of Duke Energy Corp. is based in Charlotte, N.C.

Treasuries down for the day

Treasury bonds were worse for the day after the stock market closed up significantly after dodging more negative headlines throughout the day.

The 10-year Treasury bond was down "about 23 ticks," the trader said, or about 8 bps higher at the yield to 3.34%.

"They're pretty consistent across the curve," he said. "Treasuries didn't give it all back, but gave some back."

The five-year note was also out about 8 bps to a 2.1% yield. The 30-year Treasury bond did comparably better, widening about 6 bps to 4.24%.

Transocean, BP bonds top trading

The focus was on oil companies again on Wednesday, as it has been since the BP rig explosion started an oil spill in the Gulf of Mexico.

Three of the top-traded bonds by early afternoon came from Transocean, which co-operated the drilling platform with BP.

Not far behind was a 4.75% bond due 2019 from BP Capital Markets.

"Everyone's focused on the oil bonds," a trader said. "They're just getting absolutely crushed. BP is crushed; it's widened so much."

Bonds from BP are "now being quoted at dollar prices," they said. "The bid to ask - you could drive trucks through them."

Transocean bonds take a hit

A trader said that Transocean "took a big hit. You had it going from investment-grade accounts down to junk accounts, and once it stopped trading on spread to Treasuries and started trading in dollar prices, it just went down from there."

He said that he had not seen any actual changes in the company's ratings - but the way the bonds were trading was the market's way of telling the ratings agencies where they thought it should really be.

"You've got investment-grade accounts that are possibly starting to puke this stuff out because there was a lot of it trading, and once they can't own it, the next stop on the elevator down is the high-yield guys, so at one point, you had some of the RIG issues down 7½ or 81/2-plus points."

He did see the bonds "kind of bounce off their lows for the day," with the longer-dated issues ending down between 5 and 6 points, improved from earlier in the day.

He saw more than $90 million of several Transocean issues trading, including the 6.80% bonds due 2038, the 5¼% notes due 2013 and the 6% notes due 2018.

He saw the 6.8% bonds down 6 points on the day at the end, going out at 83¼ bid, the 5¼% notes down 3 points around a 96ish level, and the 6% notes down more than 5 points at 92 5/8 bid.

He also saw about $20 million of the 7½% bonds due 2031 trading. Those gyrated around wildly between 80 bps bid and 90 bps bid - with most of the larger trades to the lower end of that range - before finishing around 80 bid.

Among the less-busy TransOcean bonds, the 7 3/8% notes due 2018 lost about 5 points to end at the 96 level.

"They all bounced off their lows - they were a good 2 to 3 points lower."

Another trader agreed that junk participants "are starting to see some of that [TransOcean]."

He said that the "RIG was very active today," noting that the 5¼% notes racked up "pages of trades" on Trace, making them the most-active bond.

He saw that paper start in the high 90s and end in 94-94½ context, at a yield of around 7½%, while the 6% notes were the second most active issue, trading at "slightly richer yields" around 7.25%. On a dollar-price basis, he said the 6% bonds finished Tuesday around 98 bid, and "first thing in the morning, they were down 8 points, before ending down around 6 points at 921/2.

The first trader further said that "while you had a lot of RIG paper coming in, the British Petroleum paper was starting to trade a lot wider, and as those got pushed wider that's when you saw the RIGs collapse - no pun intended."

He quoted the multinational oil major's bonds as widening out to around a 340 bps bid, 330 bps offered level before closing the day around 290 bps bid, 280 bps offered.

Paul Deckelman contributed to this story

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