PPL Energy brings upsized deal; few issuers looking at primary; Caterpillar Financial firms

By Andrea Heisinger and Cristal Cody

New York, Dec. 13 - Activity was again muted on Tuesday as PPL Energy Supply, LLC priced debt.

The Pennsylvania-based utility upsized its deal to $500 million from $350 million of new 10-year paper to help repay short-term debt.

The quiet day in the primary may have been due to the Federal Reserve Federal Open Market Committee meeting. The Fed announced there would be no new steps to boost economic growth this year because the economy isn't slowing dramatically. Key interest rates will continue to be held near zero.

There is also a lack of issuers needing or wanting to tap the debt market at the moment.

"Some shops have already closed down," a syndicate source said. "It's going to be very quiet, next week especially."

There is little new deal volume expected for the remainder of the week as companies instead look to January for any non-urgent financing needs.

"There may be one or two [companies] that desperately need to get in before year end, but otherwise we're not going to see much," a source said.

Corporate bonds were mostly flat on the day. The Markit CDX Series 17 North American high-grade index eased 1 basis point to a spread of 127 bps.

PPL Energy Supply's notes traded about 2 bps tighter, while Caterpillar Financial Services Corp.'s notes sold the previous day firmed about 5 bps by Tuesday afternoon.

Overall trading volume climbed to more than $10 billion on Tuesday from $7.5 billion on Monday.

Investment-grade bank and brokerage credit default swaps costs traded lower on Tuesday.

Bank paper CDS costs were 1 bp to 15 bps lower, and brokerage company paper CDS costs traded 5 bps to 10 bps lower.

Treasuries ended higher after the Federal Reserve took no monetary policy action on Tuesday. The benchmark 10-year Treasury note yield fell 4 bps to 1.97%. The 30-year bond yield dropped to 3.01% from 3.05%.

PPL Energy upsizes

PPL Energy Supply sold an upsized $500 million of 4.6% 10-year senior notes (Baa2/BBB/BBB) to yield Treasuries plus 262.5 bps, an informed source said.

The deal size was increased from $500 million, the source said. The debt was priced at the low end of both whispered guidance in the mid-to-high 200 bps and revised talk in the 262.5 to 275 bps range.

There was roughly $700 million on the books, the source said.

"We weren't sure how the market would take it," the source said, referring to the Fed Meeting. "It ended up going really well, and we had a high quality book. We were in and out."

Bookrunners were Deutsche Bank Securities Inc., RBS Securities Inc., Scotia Capital (USA) Inc. and Wells Fargo Securities LLC.

Proceeds will be used to repay short-term debt incurred to repay $500 million of 6.4% notes due Nov. 1 and any remainder will go for general corporate purposes.

PPL Energy was last in the market with a $300 million deal of 6.3% five-year debt on July 16, 2008. Those notes priced at 315 bps over Treasuries.

In the secondary market, the notes due 2021 traded at 260 bps bid, 256 bps offered, a trader said.

The utility is based in Allentown, Pa.

CAT Financial

Caterpillar Financial Services' 1.125% three-year notes (A2/A/A) priced at a spread of Treasuries plus 85 bps traded tighter on Tuesday at 79 bps bid, according to a trader.

Caterpillar Financial sold the notes in a $400 million tranche on Tuesday.

The funding arm of heavy equipment maker Caterpillar is based in Nashville, Tenn.

Paul Deckelman contributed to this review

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