NBC Universal, Exelon, Airgas, JPMorgan among sellers; deal puts focus on Alberto Culver debt

By Andrea Heisinger and Cristal Cody

New York, Sept. 27 - NBC Universal, Inc., Exelon Generation Co., LLC, Nordea Bank, Entergy Gulf States Louisiana LLC, Airgas, Inc., Alabama Power Co., JPMorgan Chase & Co., Oesterreichische Kontrollbank AG and Pepco Holdings, Inc. sold bonds as the week got started with some big deals.

NBC Universal priced its second deal in five months to help pay its share of its sale to Comcast Corp. That $5.1 billion monster deal was upsized from an initial minimum size of $2.1 billion and priced late in the day.

A subsidiary of Exelon Corp. sold $900 million of notes in two tranches. The sale consisted of $550 million of 10-year notes and $350 million of 31-year notes, both priced at the tight end of price guidance.

One of the first sales came from Alabama Power with its $250 million deal of 10-year notes. Another utility, Entergy Gulf States, priced $250 million of 10-year first mortgage bonds at about the same time.

There was one domestic deal in the financial sector from JPMorgan Chase, with a $1.15 billion sale of notes in two tranches. The deal had a $550 million tranche of three-year notes and a $600 million tranche of three-year floating-rate notes. The size of the sale was increased from an initial $500 million, a source said.

Austria's OeKB sold $1 billion of five-year notes that are guaranteed by that country's government.

Electric and natural gas supplier Pepco Holdings sold $250 million of five-year notes after announcing its deal late in the morning.

Also pricing $250 million of five-year notes was Airgas.

Sweden-based Nordea Bank priced $1.5 billion in two tranches under Rule 144A. The deal included $1 billion of three-year notes and a $500 million reopening of its 4.875% bonds due 2020.

One source said: "Obviously anytime you can get a $5.1 billion deal done [from NBC], it's a good day."

He also commented on the strength of the market, with "almost $10 billion priced" for the day. There was about $10.65 billion of new bonds, including the guaranteed deal from OeKB.

Elsewhere, speculation grew that Alberto Culver Co.'s new $150 million of notes priced in May would be redeemed on the company's buyout by Unilever plc.

In trading, overall investment-grade Trace volume edged down 1% to $11.4 billion, a source said.

The Markit CDX Series 14 North American investment-grade index eased 1 bp to a spread of 110 bps, according to Markit Group Ltd.

Treasuries rallied on Monday on the heels of good demand at the auction for $36 billion of two-year notes.

The yield on the 10-year benchmark note fell to 2.53% from 2.61%. The 30-year bond yielded 3.72% on Monday, down from 3.79% on Friday.

"We think that a lot of this is just parking cash before the quarter-end and just the potential for the effects of intervention money eventually making a home in the front end," said George Goncalves, strategist at Nomura Securities International, Inc.

NBC Universal $5.1 billion

NBC Universal sold a massively upsized $5.1 billion of senior unsecured notes (Baa2/BBB+) in four tranches late in the day, a source away from the sale said.

The size had initially been announced at $2.1 billion earlier in the day, with upsizing due to demand and reverse inquiry.

The $900 million tranche of 2.1% notes due 2014 priced at a spread of 145 bps over Treasuries. Guidance was in the 150 bps area, with the notes priced at the tight end of that.

A second tranche was $1 billion of 2.875% notes due 2016 with a price of Treasuries plus 160 bps. The notes were talked in the 165 bps area and priced at the tightest end of that.

The $2 billion of 4.375% notes due 2021 priced at Treasuries plus 185 bps. These were sold at the tight end of guidance in the 190 bps area.

A final tranche was $1.2 billion of 5.95% notes due 2041 priced at a spread of 225 bps over Treasuries. The notes priced at the tight end of talk in the 230 bps area.

All of the price guidance on the tranches had a margin of plus or minus 5 bps. They were priced under Rule 144A and Regulation S.

Bookrunners were Goldman Sachs & Co., J.P. Morgan Securities and Morgan Stanley & Co. Inc.

Proceeds are being used as part of $9.1 billion in financing to be paid by NBC Universal to General Electric Co. in connection with the combination of NBC Universal with Comcast Corp.

NBC Universal last priced bonds in a $4 billion deal in three tranches on April 27. Those tranches all priced at significantly lower spreads, with the 3.65% five-years priced at 128 bps over Treasuries, the 5.15% 10-year at 148 bps over Treasuries and the 6.4% 30-year bond at 183 bps over Treasuries.

The broadcasting and entertainment company is based in New York City.

Exelon sells $900 million

Exelon Generation sold $900 million of senior unsecured notes (A3/BBB/BBB+) in two tranches, an informed source said.

A $550 million tranche of 4% 10-year notes priced at a spread of 150 bps over Treasuries. Price talk was in the 155 bps area, with the notes pricing at the tight end of that. Initial guidance was whispered in the mid-100 bps area, the source said.

The second tranche was $350 million of 5.75% notes due 2041 priced at Treasuries plus 208 bps. The notes were talked in the area of 212.5 bps and also priced at the tight end of guidance. Initial talk was in the low-200 bps area.

There was about $2.25 billion on the books for the sale, with about $1.25 billion in the 10-year notes and $1 billion in the 31-years, the source said.

"The company wanted more in the 10-year money," he said. It opted for the long 30-year bond because it "fit into the optics of their maturity management," since it has a bond maturing in 2039.

The notes will be freed to trade on Tuesday, he added.

Barclays Capital Inc., Citigroup Global Markets, Goldman Sachs & Co. and RBS Securities were bookrunners.

Proceeds are being used to fund a portion of the purchase price of an acquisition of membership interests of John Deere Renewables LLC from Deere & Co., for fees and costs associated with the acquisition, and for general corporate purposes.

The electric generation subsidiary of Exelon Corp. is based in Kennett Square, Pa.

Strong start to week

There is around $25 billion of new bonds expected to hit the high-grade bond market for the week, with more than $10 billion of that getting sold off the bat Monday.

The tone was OK, with one source calling it a "flat to negative day."

"I think today we saw more price than people expected," he said.

The NBC sale wasn't unexpected, but the size may have been.

"I don't know that we were thinking they would print that much [paper]," a syndicate source away from the sale said. "It was good though."

Tuesday is thought to be busy, but likely with smaller sales like the handful of energy and utility names that priced to start the week.

Nordea Bank's $1.5 billion

Sweden's Nordea Bank sold $1.5 billion of notes (Aa2/AA-/AA-) in two tranches under Rule 144A, a market source close to the deal confirmed late in the day.

A $1 billion tranche of 1.75% three-year notes priced at a spread of 115 bps over Treasuries.

The bank also reopened its 4.875% notes due 2020 to add $500 million. The notes priced at a spread of 135 bps over Treasuries.

Total issuance for the notes is $1.75 billion, including $1.25 billion priced on Jan. 21 at 135 bps over Treasuries.

Bank of America Merrill Lynch, Credit Suisse Securities and Goldman Sachs & Co. ran the books.

The financial services company is based in Stockholm.

JPMorgan's two short bonds

JPMorgan Chase sold its $1.15 billion deal of notes (Aa3/A+/AA-) in two tranches, a source away from the sale said.

A $550 million tranche of 1.65% three-year notes priced at a spread of Treasuries plus 100 bps.

A second tranche of $600 million of three-year floating-rate notes sold at par to yield three-month Libor plus 75 bps.

Full terms were not available at press time.

J.P. Morgan Securities ran the books.

The financial services company is based in New York City.

OeKB prices guaranteed bonds

Oesterreichische Kontrollbank sold $1 billion of 1.75% five-year guaranteed global bonds at 49 bps over Treasuries, according to an FWP filing with the Securities and Exchange Commission.

The notes (Aaa/AAA) are guaranteed by the Republic of Austria.

Lead managers were Deutsche Bank AG, London branch, Goldman Sachs & Co. International and HSBC Bank plc.

The export and financial services company for Austrian businesses is based in Vienna.

Pepco's five-years

Pepco Holdings priced $250 million of 2.7% five-year notes (Baa3/BBB+) at a spread of Treasuries plus 145 bps, a source away from the sale said in late afternoon.

Bookunners were Bank of America Merrill Lynch, RBS Securities and Scotia Capital.

Proceeds are being used to repay existing debt.

The electric and natural gas supply and delivery company is based in Washington, DC.

Airgas prices senior notes

Industrial, medical and specialty gas maker Airgas priced $250 million of 3.25% five-year senior notes (Baa3/BBB) to yield Treasuries plus 200 bps, a source who worked on the trade said late in the afternoon.

Bank of America Merrill Lynch, Goldman Sachs & Co. and Wells Fargo Securities LLC were bookrunners.

Proceeds are going to repay debt under a new senior credit facility.

The industrial, medical and specialty gases company is based in Radnor, Penn.

Entergy Gulf sells $250 million

Entergy Gulf States Louisiana sold $250 million of 3.95% 10-year first mortgage bonds (A3/BBB+) to yield Treasuries plus 145 bps, according to an FWP filing with the SEC.

J.P. Morgan Securities, Bank of New York Mellon Capital Markets, Credit Suisse Securities and KeyBanc Capital Markets were bookrunners.

Proceeds will be used to repay prior to maturity $92.12 million of 5.25% mortgage bonds due Aug. 1, 2015, $200 million of 4.875% mortgage bonds due Nov. 1, 2011 and $40 million of 5.7% mortgage bonds due June 1, 2015. Pending the application of the net proceeds, they may be invested in short-term, highly-liquid, high-rated money market instruments and/or the Entergy system money pool.

The electric power subsidiary of Entergy Corp. is based in Baton Rouge, La.

Alabama Power's 10-years

Alabama Power priced $250 million of 3.375% series 2010A 10-year senior notes (A2/A/A+) by mid-afternoon at Treasuries plus 87.5 bps, according to an FWP filing with the SEC.

Bank of New York Mellon Capital Markets, J.P. Morgan Securities and Morgan Keegan & Co. Inc. were bookrunners.

Proceeds are going toward the proposed redemption of $150 million of the company's series AA 5.625% senior notes due April 15, 2034 and for other general corporate purposes including a continuous construction program.

The utility subsidiary of the Southern Co. is based in Birmingham, Ala.

Albert Culver buyout

Speculation rose on Monday about whether London-based Unilever, which agreed to buy out Alberto Culver, will take out the company's bonds as well.

Unilever, which makes Dove soap, said on Monday that it will buy the Melrose Park, Ill.-based VO5 and Nexxus shampoo manufacturer for $3.7 billion, or $37.50 a share, in cash.

Alberto Culver's $150 million of 5.15% notes due 2020 (Baa2/BBB/), which were priced on May 19 at a spread of 175 bps over Treasuries, are likely to be taken out.

"Assuming that the acquisition would have little impact on Unilever's creditworthiness, the existing restrictive covenants would probably not be problematic to Unilever on an ongoing basis," Covenant Review, an independent credit research firm, said in a research note on Monday.

"Also, while the notes have a ratings-based change of control put at 101%, it is not likely to be effective in an acquisition of the company by Unilever due to Unilever's strong investment-grade credit profile. The notes are currently trading well above 101 in any event."

The notes were seen trading at 110 bps bid, 111 bps offered early Monday.

"The bonds were just issued. They would have to pay a lot to take them out," said Anthony P. Canale of Covenant Review. "It would be significantly north of 110."

One headache that could cause Unilever to redeem the notes early is an indenture provision that it would have to file reports with the SEC, according to the Covenant Review research note. In addition, Unilever could replace the 5.15% notes with cheaper debt borrowed by the company instead.

"This requirement for ongoing SEC filings by the company even after a Unilever acquisition would be an inconvenience and an expense for Unilever and could provide motivation for Unilever to either take out the notes (which have a T+30 make-whole), or solicit a consent from noteholders, perhaps in exchange for a Unilever guarantee," the research note said.

Fitch Ratings said it placed Alberto Culver's BBB+ issuer default rating and senior unsecured debt ratings on Rating Watch positive on the deal news. Alberto-Culver has BBB+ ratings on its $300 million bank credit facility and the unsecured notes.

Fitch said it expects that the $300 million facility will be terminated and the $150 million note repaid when the transaction is consummated.

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