Procter & Gamble, Oklahoma Gas & Electric, Ohio Power price as others wait; market wider

By Andrea Heisinger and Paul Deckelman

New York, Sept. 4 - The stream of new issues continued Thursday, with Procter & Gamble Co., Oklahoma Gas & Electric Co. and Ohio Power Co. among those pricing deals.

The flow of issuers is expected to come to a halt Friday, however, as employment numbers are released.

"We're not going to see anything coming out," one source said.

In the investment-grade secondary market Thursday, advancing issues led decliners by a ratio of 6.5 to five, while overall market activity, reflected in dollar volumes, fell by 20% from Wednesday's pace.

Spreads in general were seen wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year note tightened 7 basis points to 3.63%.

Utility names dominate primary

Two of the day's handful of issuers were utility names, with one source saying they're considered "safe" in current uncertain market conditions.

Oklahoma Gas & Electric priced $250 million of 6.35% 10-year senior notes at 99.645 to yield 6.399% with a spread of Treasuries plus 275 bps.

This was in line with price talk, a source said, which was for a spread in the 275 bps area.

It was a cut and dried issue, he said, adding that it went well.

UBS Investment Bank and Wachovia Capital Markets ran the books.

Also pricing a $250 million issue of senior notes was Ohio Power.

The company priced 5.75% five-year notes at 99.920 to yield 5.7695 with a spread of Treasuries plus 290 bps.

This was at the tight end of price talk of 290 to 300 bps, a source said.

The issue had a "very granular book," a source said, with a lot of names placing small orders.

Calyon Securities, Citigroup Global Markets Inc. and UBS were bookrunners.

Procter & Gamble prices floaters

Consumer products company Procter & Gamble priced a $2 billion issue of floating-rate notes in two tranches.

The $1.25 billion of one-year floaters priced at par to yield three-month Libor plus 3 bps.

The second tranche was $750 million of floaters due 2010 priced at par to yield three-month Libor plus 18 bps.

HSBC Securities, J.P. Morgan Securities and Morgan Stanley & Co., Inc. were bookrunners.

Also pricing an issue of floaters Thursday was Toyota Motor Credit Corp., pricing $200 million of one-year medium-term notes at par to yield Federal Funds plus 50 bps.

Agent was J.P. Morgan Securities.

Spectra Energy takes chance with issue

Spectra Energy Capital, LLC was happy to get its $500 million issue done Wednesday, vice president of communications Molly Boyd said Thursday.

"Given the fluctuations going on in the market, we were fine with the way things went," she said. "We were just glad to get a deal done in the market right now."

The company went with the two tranches structured as five- and 30-year notes because it wanted some exposure in those years, Boyd said.

The amount completed the $1 billion in debt the company had wanted to issue in 2008. It previously issued $500 million in April.

Issuance to stall Friday

Issuers looking to come into the market will likely wait until next week, sources said Thursday, with negative numbers on employment expected Friday.

"Nothing's going to happen tomorrow, obviously," a source said.

Unemployment numbers for August will be released, and are expected to rise significantly from July.

This follows the news Thursday that unemployment claims rose in the last week of August.

"It wasn't looking very good out there today, but it was kind of a weird day for news," one source said.

He was referring to the other data that came out from the Bureau of Labor Statistics. It reported that productivity grew 4.3% in the second quarter in the non-farm business sector. Labor costs were down slightly and manufacturing productivity was down 2.2%.

There are still a number of issuers waiting for better market conditions.

"It's been interesting to see how many people were not going this week," a source said. "A lot of people are sitting on the sidelines, looking at data points."

Deere, Spectra deals trade around pricing levels

A trader saw the new John Deere Capital Corp. 5.75% notes due 2018 trading at a spread over comparable Treasuries of 211 bps bid, 210 bps offered, versus the 210 bps level at which the heavy equipment maker had priced the $650 million of 10-year paper on Wednesday.

He also saw the company's new $500 million of 4.90% notes due 2013, which had priced Wednesday at 200 bps over, as having moved to an offered level around 196 bps.

Spectra Energy Corp.'s new $250 million of 7.50% bonds due 2038 traded at 320 bps bid, 318 bps offered, versus the 320 bps level at which the bonds had priced on Wednesday. He did not see the Houston-based natural gas pipeline company's $250 million of 5.90% notes due 2013, which had priced Wednesday at 300 bps over. "It was a small deal, only $250 million, that was probably placed away, is my guess."

Oncor longs slightly tighter

He saw Oncor Electric Delivery Co. LLC's new 5.95% notes due 2013 at 303 bps bid, 298 bps offered, a little better than the 305 bps level at which the utility operator's $650 million of new five-years priced on Wednesday.

Its $550 million of 6.80% notes due 2018, which had priced at 312.5 bps over, were at 313 bps bid, 309 bps offered on Thursday, while its $300 million of 7.50% bonds due 2038 were at 315 bps bid, 313 bps offered, slightly tighter than the 320 bps level at which the bonds had priced.

"Not by much," he said, or the tightening, but yeah, a little bit."

Elsewhere among new utility company paper, the trader said he had not seen Northern States Power Co.'s new 6.375% bonds due 2038, which had priced Wednesday at 210 bps over Treasuries.

"It's only a $200 million deal, that's [probably] why. All of these little deals - you're not going to see much on them."

He also did not see any secondary activity in Oklahoma Gas & Electric's new bonds, which had priced fairly late in the session. "Once again, it's a small deal, $250 million," he noted.

"Usually, what happens," he explained, is such deals come about from "one big order on a reverse inquiry, and they'll tag on some small pieces. Usually, they're buying [the whole deal], so you never see them come out in the secondary."

Wal-Mart bonds little moved on sales data

Among the established issues, the trader said that Wal-Mart Stores Inc.'s most actively traded issue, its 5.875% bonds due 2027, were not much moved, despite the Bentonville, Ark.-based retailing giant's having bucked the generally softer industry trend and reported better sales numbers for August.

He saw the bonds at 162 bps bid, 160 bps offered, versus 165 bps bid, 160 bps offered, "so it's really not much of a change on them."

Wal-Mart saw same-store sales at outlets open at least a year - the key retailing industry metric - rise 3% in August versus year-earlier levels, about twice the gain analysts had expected. The sales gain was propelled by grocery shopping by thrift-minded consumers attracted by Wal-Mart's relatively low prices, and back-to-school sales.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.