Pacific Gas & Electric, Kansas Gas, EBRD sell bonds, KfW offering on tap; trading volume low

By Andrea Heisinger

New York, June 8 - A weaker tone did no favors to a slow investment-grade primary market Monday as a handful of issuers such as Kansas Gas & Electric Co., Pacific Gas & Electric Co. and European Bank for Reconstruction and Development sold bonds.

The week is not expected to get much more exciting, a syndicate source said. One upcoming issue is expected Tuesday from German-government-owned bank KfW.

Further gains were made by most new and recent issues in the secondary market, a trader said. Kansas Gas' notes came in nicely, as did recent sales from Express Scripts, Inc. and Bunge Limited Finance Corp.

Spreads were mostly tighter as Treasury yields widened by late afternoon, a source said. The five-year note was 11 basis points wider than the previous session at a 2.94% yield. The 30-year bond was actually 1 bp tighter to yield 4.63%.

Pacific Gas upsizes sale

A $500 million sale of one-year floating-rate notes from Pacific Gas & Electric was upsized from $250 million, a source close to the sale said.

The notes priced at par to yield three-month Libor plus 95 bps.

The San Francisco-based electric and natural gas provider is using proceeds to support liquidity requirements relating to commodity hedging activities, which includes repaying commercial paper.

Citigroup Global Markets Inc. and Morgan Stanley & Co. Inc. were tapped as bookrunners.

A source close to the sale said the size was increased quickly, and ultimately the deal was oversubscribed several times. Books totaled $1.5 billion, he said.

Kansas Gas sells 10 year

Wichita, Kan.-based Kansas Gas & Electric priced $300 million 6.7% 10-year first mortgage bonds early Monday to yield Treasuries plus 287.5 bps.

The issue was done via Rule 144A.

Bank of New York Mellon Securities, Citigroup and Credit Suisse Securities were bookrunners.

The sale was nearly 10 times oversubscribed, a source said. Books came in between $2.75 billion and $3 billion, he said.

EBRD prices global note

The European Bank for Reconstruction and Development sold $1.5 billion of 1.25% two-year global notes at 99.988, according to an FWP filing with the Securities and Exchange Commission.

The London-based investment adviser for developing countries tapped Daiwa Securities, HSBC Securities, Morgan Stanley and RBC Capital Markets as bookrunners.

Tone worsens, days ahead quiet

As a backlog of deals wanes and as banks no longer clamor to sell bonds to shore up finances, the week ahead will be fairly tame.

A syndicate source said Monday was "a bit softer" in terms of tone.

"It was kind of led by the equity market," he said. "The secondary was really quiet too. There just wasn't the volume there."

The week is expected to be "top heavy" a source said.

"Volume should be lighter," they said. "I would say we'll be pretty much done after Wednesday."

There are some offerings on the calendar for Tuesday and Wednesday, but the volume of potential supply trails off after that, the source said. He added that there is no particular reason for the top-heavy schedule, except that volume is slowing.

KfW plans 10-year note deal

Germany's KfW is planning an offering of 10-year global notes, a source close to the deal said. The AAA-rated bonds will not be callable.

Barclays Capital, Citigroup and Goldman Sachs & Co. are running the books.

The sale is expected to go late morning or early afternoon Tuesday, the source said.

CMS draws high-grade interest

Junk-rated CMS Energy Corp. is expected to sell $300 million of 10-year senior notes Tuesday afternoon. Despite the high-yield ratings, a bookrunner on the investment-grade side said late Monday that the sale is being split between the two desks.

Preliminary information has the company's senior notes rated Ba1 by Moody's Investors Service and BB+ by Standard & Poor's and Fitch Ratings.

Barclays Capital and Deutsche Bank Securities are active bookrunners.

New Kansas Gas bond in 30 bps

The 6.7% bond due 2019 priced early enough to hit the secondary. A trader said the bond, which priced at 287.5 bps over Treasuries, was trading a 255 bps bid, 250 bps offered.

Express Scripts notes hold

The recent three-tranche sale from pharmacy benefit company Express Scripts held or continued gains in trading, a trader said late Monday.

The 5.25% notes due 2012 priced at 375 bps over Treasuries and were quoted at 303 bps bid, 295 bps offered. This was equal to their level late Friday.

A 6.25% note due 2014 also priced at 375 bps over Treasuries but had furthered its gains from Friday and were quoted at 297 bps bid, 292 bps offered. The previous level was 305 bps bid, 290 bps offered.

The final tranche was 7.25% bonds due 2019, which also continued gains slightly, quoted at 300 bps bid, 290 bps offered. The bond priced at Treasuries plus 362.5 bps and were quoted Friday at 305 bps bid, 290 bps offered.

Recent Bunge 10 year tightens

A bond from Bunge Limited Finance was seen continuing to tighten in the secondary late Monday, a trader said.

The issue was the second most-traded bond by earlier afternoon.

The 8.5% note due 2019 was sold at 479.4 bps over Treasuries and was quoted at 434 bps bid, 430 bps offered. This was a slight gain from Friday when it was quoted at 440 bps bid, 430 bps offered.

New bonds top trading

Two bonds priced in the previous week led trading early Monday afternoon, according to a secondary source.

A recent 2.2% bond due 2012 from GMAC LLC was at the top in trading. The bond is backed by the Federal Deposit Insurance Corp. and was a first for the normally junk-rated subsidiary of bankrupt General Motors.

The 8.5% bond due 2019 from Bunge was also popular.

Many other bonds from financial names were near the top in trading and were a mix of FDIC-backed and not.

Bank, broker CDS widen

Bank and broker credit-default swap costs were unanimously wider late Monday, a trader said.

The bank names were out 5 to 10 bps, while brokerages were 10 bps wider across the board.

Kellogg, financials lead movers

Cereal maker Kellogg Co. and financial names like Bank of America Corp. and American Express Co. had some of the day's biggest-moving bonds late Monday, a source said.

Kellogg's 4.25% bond due 2013 was more than 30 bps wider than the previous week as the company continues negotiations with union factory workers in London after locking them out of a plant.

Bank of America and American Express both had bonds tighten about 50 bps. Bank of America's 6.875% due 2028 was about 51 tighter as news came that two more of the banking giant's board members had resigned, bringing the total to five.

American Express saw its 6.15% bond due 2017 come in about 50 bps as the financial services company awaits the government's approval to repay bailout money, along with several other large financial names.

© 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.