JPMorgan, PG&E, Duke Energy lead off week's issuance; new deals mostly tighter in secondary

By Aleesia Forni and Andrea Heisinger

New York, Aug. 13 - Utilities dominated the investment-grade bond market on Monday with a wave of mostly small deals from Pacific Gas & Electric Co., Duke Energy Corp., Ameren Illinois Co., Appalachian Power Co. and Mississippi Power Co.

These were not the only issuers. JPMorgan Chase & Co. and semiconductor company Broadcom Corp. also tapped the market.

JPMorgan had the largest deal of the day at $2.5 billion in a five-year maturity.

The bank's deal was followed in size by Duke Energy, which sold $1.2 billion of bonds in tranches due 2017 and 2022.

PG&E priced $750 million of 10-year notes and 30-year bonds.

Broadcom sold $500 million of 10-year senior notes under Rule 144A and Regulation S, a source said. Terms of the deal were not available at press time.

Ameren Illinois priced $400 million of 10-year notes to raise money for a tender offer.

Appalachian Power sold an upsized $275 million of one-year floating-rate notes while Mississippi Power reopened its issue of 4.25% senior notes due March of 2042 to add $200 million.

The preferred stock market saw more new issue activity from the financial sector as Capital One Financial Corp. announced a deal of noncumulative perpetual shares.

While issuance got off to a healthy start for the week, there's more to come, sources said.

"I know we have a couple of possibilities for tomorrow, but nothing too big," said one syndicate source.

There was market chatter on Monday of a large trade pricing on Tuesday, but that won't be a sure bet until the open shows that the tone holds up overnight.

"This is supposed to be a good week, but a little less busy," a market source said. "I think we've already seen people in the last couple of weeks - those that really wanted or needed to get in."

The Markit CDX Series 18 North American Investment Grade index was 1 bps wider at a spread of 103 bps on Monday.

Meanwhile, investment-grade bank and brokerage credit default swaps costs declined on Monday, according to a market source.

Bank of America's CDS costs tightened 5 bps to 225 bps bid, 235 bps offered. Citi's CDS costs also declined 5 bps to 220 bps bid, 230 bps offered. J.P. Morgan's CDS costs were 6 bps tighter at 112 bps bid, 119 bps offered.

Brokers firmed. Merrill Lynch's CDS costs firmed 10 bps to 235 bps bid, 2545 bps offered. Morgan Stanley's CDS costs tightened by 10 bps to 320 bps bid, 330 bps offered.

New bonds were mostly tighter on the day, as JPMorgan, Duke Energy and Ameren Illinois tightened 1 bps to 5 bps in the secondary market, while PG&E's new notes were 2 to 3 bps wider near the end of the session.

JPMorgan prices tight

JPMorgan Chase priced $2.5 billion of 2% five-year notes (A2/A/A+) at a spread of Treasuries plus 135 bps, a source away from the deal said.

The notes tightened in the secondary and were quoted at 130 bps bid.

The deal was sold tighter than talk in the 137.5 bps area.

J.P. Morgan Securities LLC was bookrunner.

Proceeds are being used for general corporate purposes.

The financial services company is based in New York City.

Duke Energy's $1.2 billion

Duke Energy priced $1.2 billion of senior notes (Baa2/BBB/BBB+) in two maturities, an informed source said.

The sale saw about $4 billion in demand, skewed more toward the five-year tranche, which garnered about $2.25 billion of investor interest.

The $700 million of 1.625% five-year bonds sold at a spread of Treasuries plus 100 bps. The tranche priced tighter than talk in the 105 bps area, the source said.

The notes traded at 97 bps bid, 94 bps offered late in the session.

A $500 million tranche of 3.05% 10-year notes priced at a spread of 145 bps over Treasuries. The notes were sold in line with guidance in the 145 bps area.

One trader saw the notes 2 bps tighter at 143 bps bid, 141 bps offered.

Bookrunners were BNP Paribas Securities Corp., Bank of America Merrill Lynch, Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC.

Proceeds are being used to repay at maturity Duke Energy Ohio Inc.'s $500 million of 5.7% debentures due on Sept. 15, with any remainder for general corporate purposes, including repayment of commercial paper.

The diversified energy company is based in Charlotte, N.C.

PG&E sells two tranches

Pacific Gas & Electric sold $750 million of senior notes (A3/BBB/) in two parts, a market source said.

A $400 million tranche of 2.45% 10-year notes priced at a spread of 85 bps over Treasuries and traded at 88 bps bid, 95 bps offered.

The second part was $350 million of 3.75% 30-year bonds sold at 105 bps over Treasuries.

The notes were quoted at 108 bps bid, 105 bps offered late in the session.

Bookrunners were Barclays Capital Inc., Deutsche Bank Securities Inc., Morgan Stanley & Co. LLC and RBS Securities Inc.

Proceeds are being used for general corporate purposes, including commercial paper repayment.

PG&E, a San Francisco-based electric and natural gas utility, last sold $400 million of 4.45% bonds due 2042 at 130 bps over Treasuries on April 11.

Ameren Illinois' $400 million

Ameren Illinois was in the market with a $400 million deal of 2.7% 10-year senior secured notes (A3/BBB/BBB+) priced to yield Treasuries plus 105 bps, a market source said.

The notes traded 1 bps tighter at 104 bps bid, 102 bps offered near the day's close.

Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and UBS Securities LLC were active bookrunners.

Proceeds are being used to provide funds to complete a tender offer along with all or a portion of $51.1 million of 5.5% notes due 2014.

The electric and natural gas subsidiary of Ameren Corp. is based in St. Louis.

Appalachian Power floaters

Appalachian Power sold a slightly upsized $275 million of one-year floating-rate notes, series D, (Baa2/BBB/BBB) at par to yield Libor plus 37.5 bps, according to an FWP with the Securities and Exchange Commission.

The deal size was increased from $250 million.

Citigroup Global Markets Inc. and SunTrust Robinson Humphrey Inc. were bookrunners.

Proceeds are being used for general corporate purposes, including paying at maturity $250 million of outstanding 5.65% senior notes due August 15.

The Columbus, Ohio-based utility was last in the market with a $350 million deal of 4.6% 10-year notes priced at 130 bps over Treasuries on March 23, 2011.

Mississippi Power reopens

Mississippi Power reopened its issue of 4.25% senior notes due March 15, 2042 to add $200 million, a source close to the trade said.

The notes (A3/A/A) were sold at a spread of Treasuries plus 125 bps.

Total issuance is $450 million, including $250 million sold on March 5 at 115 bps over Treasuries.

Barclays Capital Inc., J.P. Morgan Securities LLC and Mizuho Securities USA Inc. were bookrunners.

Proceeds are being used for general corporate purposes.

The electric utility is based in Gulfport, Miss.

Capital One's preferreds

Capital One Financial will sell series B fixed rate noncumulative perpetual preferred stock, according to a prospectus filed with the SEC.

A trader said the issue is being talked in the 6% area.

The preferreds will be issued as depositary shares representing a 1/40th of an interest in each preferred security.

Capital One will apply to list the new series of preferreds on the New York Stock Exchange under the ticker symbol "COFPP."

Bank of America Merrill Lynch, JPMorgan Securities LLC, Morgan Stanley & Co. Inc., UBS Securities LLC and Wells Fargo Securities LLC are bookrunners.

Proceeds will be used for general corporate purposes, including a possible redemption of certain trust preferreds.

Capital One is a McLean, Va.-based financial institution.

Stephanie N. Rotondo contributed to this review

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