GE Capital, Ontario, Emerson Electric, Praxair, PG&E among new deal rush; HCC, Cisco tighten

By Andrea Heisinger and Paul Deckelman

New York, Nov. 10 - General Electric Capital Corp., Province of Ontario, Emerson Electric Co., Praxair Inc., Pacific Gas & Electric Co., Enogex, LLC, Massachusetts Electric Co., Entergy Louisiana LLC, HCC Insurance Holdings, Inc. were among the day's issuers in a notable surge of bond sales.

Discover Bank sold split-rated subordinated notes late in the day.

Most of the day's deals were small in size and priced quickly.

The largest came from the Province of Ontario, which sold $4 billion in two tranches of three-year notes.

GE Capital offered $1.5 billion of five-year notes that priced at the tight end of guidance.

A two-tranche sale of notes from Emerson Electric was upsized by $100 million to total $600 million. The notes due 2020 and 2039 also priced at the tight end of talk.

A handful of utility companies sold medium-sized issues.

Enogex offered $250 million of notes due 2020 via Rule 144A. Massachusetts Electric sold $800 million in 30-year bonds, also under private placement.

Pacific Gas & Electric priced $550 million of notes due in 2040. Entergy Louisiana did a deal of 15-year notes that totaled $400 million.

Outside of utilities, there was a sale from industrial gases company Praxair, which did an upsized sale of $400 million in three-year notes that priced tighter than whispered guidance.

Specialty insurance company HCC Insurance Holdings priced $300 million of 10-year notes after the sale went overnight.

The investment-grade market is expected to have several deals price on Thursday after a break for Veteran's Day, sources said.

It likely will not be as busy as the first two days of the week, however.

Among the established issues in the secondary arena on Tuesday, a market source said the CDX Series 13 North American high-grade index was steady at a mid bid-asked spread level of 98 bps, the same as Monday's level.

Advancing issues led decliners, by around a 10-to-nine ratio.

Overall market activity, reflected in dollar-volume totals, rose by 23% from Monday's pace.

Spreads in general were seen steady, in line with relatively stable Treasury yields; for instance, the yield on the benchmark 10-year notes inched downward by 2 bps Tuesday to 3.47%.

Trading in new-issue paper was the dominant feature in Tuesday's secondary market, traders said, with notable tightening in the new HCC Insurance holdings deal and, from Monday, Cisco Systems Inc.'s five-year offering.

GE Capital sells $1.5 billion

General Electric's funding arm GE Capital priced $1.5 billion of 3.75% five-year notes at 155 bps over Treasuries.

The sale priced at the tight end of guidance of 155 to 157 bps, the source said. The deal was about two times oversubscribed with orders around $3 billion.

Bank of America Merrill Lynch, Citigroup Global Markets, Goldman Sachs & Co., J.P. Morgan Securities and Morgan Stanley ran the books.

The issuer is based in Fairfield, Conn.

Ontario sells $4 billion

The Province of Ontario sold $4 billion of notes in two tranches, according to FWP filings with the Securities and Exchange Commission.

The $3 billion tranche of 1.875% three-year notes priced at a spread of Treasuries plus 55.2 bps.

A $1 billion tranche of three-year floating-rate notes priced at par to yield three-month Libor plus 15 bps.

Bookrunners were Barclays Capital, Credit Suisse Securities, J.P. Morgan Securities and Toronto-Dominion Bank.

Emerson offers upsized tranches

Engineering company Emerson Electric priced an upsized $600 million of notes in two tranches, according to an FWP filing with the SEC.

The total size was increased from $500 million, with $50 million added to each tranche. The sale was "way oversubscribed," an informed source said. There was about $3.5 billion on the books, he said.

The $300 million of 4.25% 11-year notes priced at a spread of Treasuries plus 85 bps.

A $300 million tranche of 5.25% 30-year notes priced at Treasuries plus 95 bps.

Both tranches came in at the tight end of guidance, a source close to the sale said. Talk was in the 90 bps area for the notes due 2020, and was in the 100 bps area for the 30-year tranche.

Citigroup Global Markets and J.P. Morgan Securities ran the books for the issuer based in Ferguson, Mo.

Proceeds will be used for general corporate purposes, including the acquisition of Avocent Corp. and to repay commercial paper borrowings.

Small deals sell in unchanged tone

There was a flood of new bonds into the high-grade market for the second day in a row. Sources said the flow may continue until the Thanksgiving holiday break.

Tuesday's market tone "felt neutral," a syndicate source said. "It was unchanged. [There was] not much to talk about."

Many of the day's deals were oversubscribed, and priced at the tight end of talk.

Both Praxair, and Pacific Gas & Electric, although smaller deals, were "squeezed as much as they could have" in terms of pricing, a source who worked on them said.

"There was a real push on the price by the issuers," he said.

Another source admitted he "could use a break" after two days of heavy sales. He added that "I hope it stays this way. It's more fun."

Thursday is set to keep the pace going, although perhaps with few issues.

"I think we have something for Thursday, and for Friday," the source said.

The syndicate source said that the latter half of the week "won't be like the first few days."

"Honestly, I don't know what we have on tap," he said, in reference to his desk's calendar for the remainder of the week.

Cisco deal popular

The $5 billion of notes sold late Monday by Cisco Systems, Inc. were popular with investors, a source who worked on the sale said on Tuesday.

"It was basically a blowout," he said.

The sale was about three times oversubscribed, he said.

The deal was split into tranches with five, 10 and 30-year maturities. The proceeds are being at least partly used to fund future acquisitions.

Praxair upsizes three-year notes

Industrial gases maker Praxair priced an upsized $400 million of 1.75% three-year notes at 50 bps over Treasuries, according to a market source and a press release.

The size was initially $300 million, a source said. The deal priced at the tight end of talk, a source close to it said, with guidance whispered in the 60 bps area.

Bank of America Merrill Lynch and Deutsche Bank Securities were bookrunners.

Proceeds are going to repay short-term debt, fund share repurchases and for general corporate purposes.

The issuer is based in Danbury, Conn.

Discover Bank prices split-rated notes

Discover Financial Services banking subsidiary Discover Bank sold $700 million of 8.7% split-rated 10-year subordinated notes (Ba1/BBB-/BBB-) late in the afternoon at Treasuries plus 525 bps, a market source said.

The sale went overnight from Monday.

Goldman Sachs & Co. ran the books for the issuer based in Riverwoods, Ill.

Proceeds will be used for general corporate purposes.

Pacific Gas sells $550 million

PG&E Corp. subsidiary Pacific Gas & Electric priced $550 million of 5.4% senior notes due in 2040 at 110 bps over Treasuries, an informed source said.

Price guidance was based on outstanding notes from the issuer, the source said, which was how it was sold at 110 bps.

Bank of America Merrill Lynch, Deutsche Bank Securities and RBS Securities were bookrunners.

Proceeds are going toward working capital.

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

Entergy Louisiana sells mortgage bonds

Entergy Louisiana sold $400 million of 5.4% 15-year first mortgage bonds at 195 bps over Treasuries.

KeyBanc Capital Markets, J.P. Morgan Securities and RBS Securities were bookrunners.

Proceeds will go toward working capital and general corporate purposes.

The subsidiary of utility company Entergy Corp. is based in New Orleans.

Enogex sells notes in private placement

Midstream natural gas pipeline Enogex priced $250 million of 6.25% senior notes due in 2020 at Treasuries plus 287.5 bps, an informed source said.

The deal was done via Rule 144A.

J.P. Morgan Securities, Mitsubishi UFJ Securities and Wells Fargo Securities were bookrunners.

The subsidiary of OGE Energy Corp. is based in Oklahoma City, Oklahoma.

HCC prices two-day deal

Specialty insurance group HCC Insurance Holdings priced $300 million of 6.3% 10-year senior unsecured notes at Treasuries plus 287.5 bps, a market source said.

Bookrunners for the deal from the Houston-based company were Bank of America Merrill Lynch, J.P. Morgan Securities and Wells Fargo Securities.

Proceeds will go to repay outstanding debt under a revolving credit facility.

Massachusetts Electric prices $800 million

London-based utility National Grid plc subsidiary Massachusetts Electric sold $800 million of 5.9% 30-year notes at Treasuries plus 150 bps via Rule 144A.

Bank of New York Mellon, Citigroup Global Markets, Mizuho Securities and Wells Fargo Securities ran the books.

GE Capital deal little moved

When the new General Electric Capital Corp. 3.75% notes due 2014 - the day's biggest new U.S. deal - were freed for secondary dealings, traders did not see the Fairfield, Conn.-based General Electric Co. financing arm's bonds going very far - one quoted the bonds at 156 bps bid, 153 bps offered, versus the 155 bps over spread versus comparable Treasuries at which the $1.5 billion mega-deal had priced.

A second trader said the bonds had last traded at 155 bps bid, 152 bps offered.

HCC improves

But while it was not the biggest deal of the day, one of the best performing was HCC Insurance Holdings' $300 million of 6.30% notes due 2019.

A trader saw those bonds bid at tight as 273 bps over - well in from the 287.5 bps over level at which the bonds had priced, and said there had been offers to buy the bonds at 277 bps .

A second trader saw somewhat less tightening in the new issue, pegging it at 280 bps bid, 275 bps offered.

Cisco is a star

Among the industrial names, a trader saw brisk activity in Cisco Systems' new bonds, which priced in a gigantic three-part deal Monday that totaled $5 billion, noting that the San Jose, Calif.-based maker of communications networking systems "is always a hot name.

"It got a lot of play."

While its $2 billion offering of 5.50% bonds due 2040 were seen offered at 131 bps, not far from its pricing spread at 130 bps, the 500 million of 2.90% notes due 2014 "tightened up quite a bit," trading as narrow as 48 bps over the five-year Treasury, versus the 67 bps level at their pricing.

"The five-year seems to be the hot item," the trader declared..

Cisco's $2.5 billion of 4.45% notes due 2019, which priced at 100 bps over, traded at 98 bps bid, 95 bps offered and later, at 97 bps bid.

Massachusetts moves tighter

A trader saw the Massachusetts Electric 5.90% bonds due 2039 having "tightened up a little bit" to a bid level of 145 bps, and then, separately, an offered level around 140 bps.

That compares to the 150 bps over level at which the utility company's $800 million had priced earlier.

A trader at another desk also quoted those bonds at 145 bps bid, 140 bps offered.

Entergy stays around issue

Also in the power-generating sphere, Entergy Louisiana's $400 million of 5.40% bonds due 2024 were left quoted at 193 bps bid, 191 bps offered, versus the 195 bps over level at which the bonds had priced..

A second trader saw the bonds bid at 192 bps over, but saw no offered side.

Emerson Electric seen steady

A trader saw Emerson Electric's new two-part issue holding to within 1 bp or 2 bps of where those tranches had priced.

He saw the $300 million of 4.25% notes due 2020 at 83 bps bid, 77 bps offered, versus the 85 bps over level at which the bonds had been priced.

He also saw its $300 million of 5.25% bonds due 2039 at 93 bps bid, 90 bps offered, versus the 95 bps over level at the pricing.

Another trader noted that each tranche was originally to have been $250 million, but was upsized to $300 million for a $600 million total offering.

With new-deal activity dominating the market, established bonds, a trader said, "definitely took a back seat."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.