Florida Power, Duke Energy, JBIC, HSBC, FPL price as window opens; secondary seen active on influx

By Andrea Heisinger

Omaha, June 11 - A window opened Wednesday, with issuers like Florida Power Corp. d/b/a Progress Energy Florida, Inc., Duke Energy Corp., Japan Bank for International Cooperation, HSBC Bank USA, JPMorgan Chase & Co., FPL Group Capital, Inc. and Principal Life Income Funding Trust 38 taking advantage of relative stability to price issues that have been waiting to come into the market.

The day's volume gave the week a boost after a slow start due to negativity and skittish issuers.

"Things went out softer this morning, and equity got hammered," a source said. "But it was a more positive day than we've seen."

The secondary market picked up a bit Wednesday as well with the influx of new issues.

Secondary spreads were a little better at the beginning of the day, and then turned weaker, a source said.

"It was partly because of the stock market being down," he said. "Things picked up a little bit because of the new issuance coming in."

Utilities, financials dominate

Those new issues were heavy on utilities and financial names.

Duke Energy was one of those, pricing $500 million in two tranches.

The $250 million tranche of 5.65% five-year notes priced at 99.803 to yield 5.696% with a spread of Treasuries plus 220 basis points.

The $250 million of 6.25% 10-year notes priced at 99.743 to yield 6.285% with a spread of Treasuries plus 220 bps.

Both tranches priced in line with talk for a spread in the 220 bps area, a source close to the deal said.

"It went well even with quite a bit of energy [issuers]," he said. "There was kind of a saturation of the market today. We still achieved a book that was moderately oversubscribed."

Bookrunners for the issue were Credit Suisse Securities, Goldman Sachs & Co. and Lehman Brothers Inc.

Florida Power brings $1 billion

Florida Power was another utility in the market, pricing $1.5 billion in two tranches.

The $500 million of 5.65% 10-year notes priced at 99.639 to yield 5.698% with a spread of Treasuries plus 163 bps.

The $1 billion tranche of 6.4% 30-year notes priced at 99.578 to yield 6.432% with a spread of Treasuries plus 175 bps.

Bookrunners were Barclays Capital Inc., Citigroup Global Markets Inc. and RBS Greenwich Capital.

FPL Group Capital was another issuer with a utility connection, pricing $500 million in two tranches.

The $250 million of three-year floating-rate notes priced at par to yield three-month Libor plus 88 bps.

The $250 million tranche of 5.35% five-year notes priced at 99.992 to yield 5.352% with a spread of Treasuries plus 188 bps.

Bookrunners were Barclays, Credit Suisse, Lehman Brothers and RBS Greenwich Capital.

HSBC sells bank notes

Financial issuers brought smaller amounts into the market.

HSBC Bank priced $700 million of 7% bank notes due 2039 at 98.797 to yield 7.096% with a spread of Treasuries plus 240 bps.

HSBC Securities Inc. was bookrunner.

JPMorgan Chase priced $300 million 4.85% three-year medium-term notes at 99.967 with a spread of Treasuries plus 165.1 bps.

J.P. Morgan Securities Inc. ran the books.

Principal Life priced $250 million of 5.15% three-year notes at 99.934 with a spread of Treasuries plus 200 bps.

Barclays and Merrill Lynch, Pierce, Fenner & Smith Inc. were bookrunners.

The day also had a sovereign issue from JBIC.

The Japanese development bank priced $1.5 billion of 4.25% five-year guaranteed bonds at 99.511 to yield 4.36% with a spread of Treasuries plus 86.5 bps.

BNP Paribas Securities, J.P. Morgan and Morgan Stanley & Co., Inc. were bookrunners.

Lehman Brothers diverts attention

Although there was more to keep people busy in the primary market, eyes were still watching for news on Lehman Brothers, which announced a $2.8 billion loss earlier this week.

A backlog has been building for the last few days when conditions were unfavorable, with some of it coming out Wednesday, but more remaining.

"I think we'll see some of it tomorrow and carrying into next week," a source said.

What Thursday brings depends on how the Asian and European markets do overnight, he said.

"I think it will take a solid day again to make issuers feel comfortable."

Value seen in current spreads

One source said that he sees some value in the high-grade market considering how much it's widened, adding that spreads look fairly high on a historical basis.

Some of Wednesday's issues tightened slightly or remained unchanged after pricing.

The Duke Energy five-year notes were seen at 218 bps bid, 210 bps offered after pricing at 220 bps. No levels were seen for the 10-year notes after pricing.

The five-year notes from FPL Group Capital were seen at 179 bps bid, 176 bps offered after pricing at 188 bps.

The Florida Power tranches each tightened by about 5 bps, with the 10-year notes seen at 158 bps after pricing at 163 bps. The 30-year notes were seen at 170 bps from pricing at 175 bps.

The HSBC notes were seen a little better, then weaker after pricing, a source said.

Bank spreads were seen 1 bp tighter, a trader said, adding that "WaMu was 15 [basis] points out."

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