DirecTV Holdings/Financing monopolize primary with huge deal; DTV bonds mixed in trading

By Andrea Heisinger and Cristal Cody

New York, March 7 - Bond sales got off to a slow start in the high-grade market on Monday as DirecTV Holdings LLC and DirecTV Financing Co., Inc. offered the only new deal.

The units of satellite TV programmer DirecTV sold $4 billion of notes in three parts, making it one of the largest deals so far in 2011.

The sale was divided among five-, 10- and 30-year maturities, and the proceeds are being used for share repurchases and other corporate purposes.

There was a sale of perpetual preferred stock by Southern California Edison Co. late in the day. The electric utility sold $125 million at $100 per share.

There was also an announcement for a preferred sale on Tuesday from Pebblebrook Hotel Trust. There is neither size nor ratings for the deal yet, but a trader said it was "a small, one-off deal; don't think this will command a lot of attention."

Overall investment-grade Trace volume was up less than 10% to about $11.5 billion, a market source said.

The launch and pricing are expected in the morning.

In the secondary market, DirecTV's new and existing debt was active, sources said. The new notes traded firmer soon after pricing, but then widened on the bid side headed into the close, traders said.

Bonds were mostly flat on the day, sources said. The Markit CDX Series 14 North American investment-grade index was unchanged at a spread of 84 bps, according to Markit Group Ltd.

Government bonds fell on the longer end of the curve as traders positioned for the week's debt auctions, including $32 billion of three-year notes on Tuesday.

The 10-year note yield rose 2 bps to 3.51%. The 30-year bond yield also closed up 2 bps at 4.62%.

Volume set to rise

Although the week got off to a cautious start, that may not last long, sources said late in the day.

One market source said that they had "two to three potential deals" for Tuesday, and another source at a syndicate desk said they also had a healthy calendar.

The day was expected to be busier, but some companies hesitated to tap the market at the start of the week.

"Today a few deals were supposed to go but didn't," a syndicate source said. "I don't know what it is about Mondays."

After commenting that Monday was "pretty boring if you weren't on DirecTV," a market source said that could change quickly.

"It could be one of the busier days of the year, definitely," he said about Tuesday.

DirecTV brings massive deal

DirecTV Holdings and DirecTV Financing priced $4 billion of senior notes (Baa2/BBB/BBB-) in three parts by late afternoon, said a market source away from the sale.

There was about $10 billion on the books for the offering, which one source called "a huge blowout" with high investor interest.

A $1.5 billion tranche of 3.5% five-year notes priced at a spread of Treasuries plus 135 bps.

The $1.5 billion tranche of 5% 10-year notes sold at 155 bps over Treasuries.

The final part was $1 billion of 6.375% 30-year bonds that sold at a spread of Treasuries plus 175 bps.

Active bookrunners were Credit Suisse Securities (USA) LLC and Morgan Stanley & Co., Inc.

Proceeds were used for general corporate purposes, including distribution to the parent company for a share repurchase plan and other corporate purposes.

The sale is guaranteed by domestic subsidiaries.

These issuers last priced debt in a $3 billion sale in three parts on Aug. 10, 2010. Those notes priced at much higher spreads as the notes due 2016 sold at 170 bps, the notes due 2021 at 185 bps and the notes due 2040 at 210 bps over Treasuries.

The company's new bonds were mixed in secondary trading, sources said.

DirecTV's notes due 2016 tightened soon after pricing in trading at 132 bps bid, 129 bps offered, one trader said.

The notes due 2021 were seen at 150 bps bid, while the tranche of bonds due 2041 traded at 174 bps offered.

Late afternoon, though, the bonds moved out on the bid side in the secondary, another trader said.

The tranche of five-year notes was quoted at 136 bps bid, 133 bps offered.

The 10-year notes also were wider on the bid side at 156 bps bid, 153 bps offered.

Also, the 30-year bonds traded at 177 bps bid, 174 bps offered.

The company's existing debt also was active in the secondary on Monday, a source said. DirecTV's 4.6% notes due 2021 traded late in the day at 159 bps. The bonds were sold on Aug. 10, 2010 at a spread of 185 bps.

The satellite TV company is based in El Segundo, Calif.

SoCal Edison's preferreds

Southern California Edison priced $125 million, or 1.25 million shares, of 6.5% perpetual series D preference stock (Baa2/BBB-) by late afternoon at par of $100, a market source said.

There was about $250 million of demand on the books, the source said.

"I was surprised the deal hasn't grown," he added, noting that he had heard the syndicate received interest for about double that amount.

"Unlike their outstanding issues, this one has dividends that are cumulative," the trader said. He called that feature "interesting," considering that the company had omitted dividends on their non-cumulative issues back in 2001 and 2002. That meant holders of those securities lost out on all that interest.

"I'd like to think the market demanded it. However, it certainly wasn't in the issuer's interest," he said.

Citigroup Global Markets Inc., Goldman Sachs & Co. and J.P. Morgan Securities LLC were bookrunners.

Proceeds are being used for general corporate purposes.

The electric utility is based in Rosemead, Calif.

Pebblebrook talks preferreds

Pebblebrook Hotel Trust announced a sale of perpetual series A cumulative preferred stock priced at $25 in a 424B5 filing with the Securities and Exchange Commission.

The deal is expected to launch and price on Tuesday in order to let the Asian markets look at it, a source said. The shares are being talked at a coupon of 7.875% to 8%.

The securities are not rated.

Wells Fargo Securities LLC is active bookrunner.

Proceeds are being contributed to the operating partnership to invest in hotel properties and also used for general business purposes.

The hotel investment company is based in Bethesda, Maryland.

Stephanie N. Rotondo contributed to this report

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