Xcel Energy, San Diego G&E, Pearson Funding price bonds; primary turns positive; Goldman firms

By Andrea Heisinger and Cristal Cody

New York, May 10 - It was the most plentiful day for bond issues in the past couple of weeks on Monday as Xcel Energy Inc., San Diego Gas & Electric Co. and Pearson Funding Two plc each priced deals.

Minneapolis-based utility Xcel Energy sold an upsized $550 million of 10-year notes tight to talk.

Another utility, San Diego Gas & Electric, priced $250 million of 30-year first mortgage bonds.

Also pricing notes was a funding arm of London-based Pearson plc, Pearson Funding Two. It priced $350 million of six-year notes under Rule 144A.

The market was far more upbeat than it had been in the previous week, when volatility virtually shut out issuers. There were only two deals priced in the past week.

That positive turn was due in part to diminished fears over Greece after an increased aid package was announced over the weekend to stave off the collapse of the country's economy.

The stock market also got a bounce after ending the previous week on a dismal note.

"I think it just felt better out there," a source said. "We have lots of people with cash ready to get in."

Also, in secondary trading, Goldman Sachs Group Inc.'s paper and the financial sector overall firmed on Monday, according to sources.

Also in investment grade, the CDX Series 14 North American high-grade index was 19 bps tighter at a mid bid-asked spread level of 100 bps on Monday, according to a source.

"What a difference a weekend makes," a trader said.

Elsewhere, overall Trace volume slipped about 3% to $11.4 billion, a source said.

Treasuries eased on Monday in reaction to a Sunday agreement from Europe to provide a $970 billion loan package to curb the growing debt crisis spreading across the eurozone.

Yields on the 10-year benchmark Treasury note moved out 12 bps to 3.54%. In addition, the yield on the 30-year Treasury bond eased 14 bps to 4.41%.

The European Union and the International Monetary Fund agreed late Sunday to create the package after growing concern that Greece's debt problems would spread to other eurozone countries sent the markets into a freefall last week. Investment-grade bonds were seen moving out more than 50 bps in trading on Thursday, while the Dow Jones Industrial Average lost nearly 1,000 points on the same day in its worst daily loss ever.

Xcel Energy upsizes 10-year

Xcel Energy priced an upsized $550 million of 4.7% 10-year senior unsecured notes (Baa1/BBB/BBB+) by mid-afternoon to yield Treasuries plus 120 bps, an informed source said.

The size was increased from $500 million, with the notes pricing tight to talk in 125 bps area, a source said.

They were quoted trading soon after at 123 bps bid, 113 bps offered, another trader said.

Near the session close, the notes were quoted at 123 bps bid, 115 bps offered, according to a source.

Barclays Capital, Morgan Stanley & Co. and UBS Investment Bank were bookrunners.

Proceeds will be added to a general corporate fund to repay commercial paper and to fund equity investments in one or more utility subsidiaries.

The public utility holding company is based in Minneapolis.

San Diego G&E prices mortgage bonds

Sempra Energy subsidiary San Diego Gas & Electric priced $250 million of 5.35% 30-year series HHH first mortgage bonds (Aa3/A+/AA) to yield Treasuries plus 95 bps, a source close to the sale said.

Talk on the notes was initially in the low 100 bps, the source said, and then priced tight to the revised guidance in the 100 bps area.

The bonds were seen tighter at 91 bps bid, 88 bps offered late in the day before last been quoted at 91 bps bid, 89 bps offered, other traders said.

Books were between $1.5 billion and $1.75 billion. The size did not change from the original amount of $250 million, the source said.

Bookrunners were Citigroup Global Markets, Deutsche Bank Securities, Loop Capital Markets and UBS Investment Bank.

Proceeds are being used for general corporate purposes.

The electric and natural gas provider is based in San Diego.

Interest remains in high-grade bonds

It was hard to tell in the past couple of weeks, but there is still plenty of cash out there with interest in investment-grade bonds.

"Things are pricing pretty good, and there are a lot of accounts ready out there," a market source said at the end of the day.

New issue concessions had risen in the previous volatile week, but remain reasonable for most issuers.

One example was the day's deal from Xcel Energy, which not only was upsized by $50 million, but priced tight to guidance.

The sale from San Diego Gas & Electric also priced tight to talk, although it wasn't upsized.

It also came in between six and seven times oversubscribed.

"There are a lot of high-quality names - there's a good bid out there," a source said of the interest in the day's issues.

As long as no more negative headlines cloud the market, there should be a handful more of small deals for the week. Syndicate desks are not expecting to bring anything large to the market in the coming few days.

One source at a larger desk said he had "a couple more this week - nothing too big or crazy."

He added, "We should keep it going."

Pearson Funding Two's Rule 144A bonds

Pearson Funding Two priced $350 million of 4% six-year notes (Baa1/BBB+) at 185 bps over Treasuries, a source close to the deal said.

They were sold under Rule 144A.

Bookrunners were Bank of America Merrill Lynch and J.P. Morgan Securities.

The issuing arm of media and education conglomerate Pearson plc is based in London.

Goldman, financials tighten

Meanwhile, Goldman Sachs' paper was tighter in trading, a source said.

The New York-based bank's 5.375% notes due 2020 were "about 30 bps tighter early and came in to around 20 throughout the day," the source said. "Heard all bank and finance paper's in quite a bit - ending 15-20 bps tighter - but spreads were all over the place to the tighter side."

Goldman Sachs' 10-year notes were quoted earlier on Monday trading at 233 bps, a source said.

The 10-year notes had widened nearly 40 bps on Friday and had moved out nearly 100 bps in trading the previous week.

Goldman Sachs is facing civil from charges from the Securities and Exchange Commission and a criminal investigation by the Justice Department into its handling of subprime mortgage securities investments.

Bank/brokerage CDS costs firm

A trader who watches the credit-default swaps market said that the cost of protecting holders of bonds issued by major banks, such as Bank of America, Citigroup and JP Morgan Chase, against a possible event of default tightened by between 18 bps and 22 bps on the on the session, reflecting renewed investor confidence in the sector.

He also saw the CDS protection cost of bonds of major investment banking houses like Morgan Stanley and Goldman Sachs were 14 bps to 25 bps lower, with Goldman's CDS cost in by 25 bps at 190/195 bps.

Paul Deckelman contributed to this report.

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