PG&E sells upsized deal; weak primary tone continues; Kroger, Mack-Cali Realty trade tighter

By Andrea Heisinger and Cristal Cody

New York, April 11 - There was one new deal from Pacific Gas & Electric Co. on the primary side of the market on Wednesday. The company priced an upsized $400 million of 30-year senior notes. The deal size was increased from $300 million.

The market was weak, as it has been most of the week despite a few deals pricing on Tuesday.

"It still wasn't great out there," a source said. "A lot of people are waiting it out if they don't have to [price]."

It's possible a couple of deals could be priced on Thursday, but the light volume is expected to continue.

"I mean, you have a bunch of crappy headlines and then earnings," a syndicate source said. "Some people don't want to issue until after the banks announce [earnings]."

Corporate bonds traded tighter overall on the day. The Markit CDX Series 18 North American Investment Grade index firmed 2 basis points to a spread of 102 bps.

Pacific Gas & Electric's notes traded 4 bps better in the secondary market.

Kroger Co.'s two tranches tightened 3 bps to 7 bps.

The new offering of 10-year notes that Mack-Cali Realty, LP priced Tuesday traded 8 bps better.

Investment-grade bank and brokerage credit default swaps costs declined across the board.

Among banks, Bank of America's CDS costs firmed 14 bps to 270 bps bid, 283 bps offered. Wells Fargo's CDS costs tightened 7 bps to 93 bps bid, 98 bps offered.

Among brokers, Goldman Sachs' CDS costs tightened 17 bps to 278 bps bid, 283 bps offered. Merrill Lynch's CDS costs traded 15 bps tighter to 295 bps bid, 305 bps offered. Morgan Stanley's CDS costs firmed 13 bps to 377 bps bid, 382 bps offered.

Treasuries traded weaker. The benchmark 10-year note yield rose to 2.03% from 1.98%. The yield on the 30-year bond closed up 6 bps at 3.19%.

PG&E's 30-year bonds

Pacific Gas & Electric sold an upsized $400 million of 4.45% 30-year senior notes (A3/BBB/) to yield Treasuries plus 130 bps, an informed source said.

The size of the trade was increased from $300 million. The deal was priced lower than guidance in the mid-100 bps area, the source said.

There was roughly $2.75 billion of demand on the books for the sale.

The active bookrunners were Goldman Sachs & Co., J.P. Morgan Securities LLC and Wells Fargo Securities LLC.

Proceeds are being used for general corporate purposes, including repaying a portion of commercial paper.

Pacific Gas & Electric's notes traded tighter at 126 bps bid, 123 bps offered in the secondary market, a trader said.

The electric and natural gas utility is based in San Francisco.

Kroger firms

Kroger's $850 million offering of senior notes (Baa2/BBB/BBB) sold in two tranches on Tuesday traded better in the secondary market on Wednesday, a trader said.

The tranche of 3.4% notes due 2022 firmed to 143 bps bid, 140 bps offered. Kroger sold $500 million of the 10-year notes at a spread of Treasuries plus 150 bps.

The tranche of 5% bonds due 2042 traded 3 bps tighter at 187 bps bid, 184 bps offered. The company priced $350 million of the 30-year bonds at Treasuries plus 190 bps.

The grocery retailer is based in Cincinnati.

Mack-Cali Realty

Mack-Cali Realty's 4.5% senior notes due 2022 tightened in trading to 247 bps bid, 242 bps offered, a trader said late afternoon on Wednesday.

Mack-Cali Realty sold $300 million of the 10-year notes (Baa2/BBB/) to yield Treasuries plus 255 bps on Tuesday.

The real estate company is based in Edison, N.J.

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