Progress Energy Carolinas prices debt as many more stand down; deal firms; trading day quiet

By Andrea Heisinger and Cristal Cody

New York, Sept. 12 - Despite an extensive calendar of deals expected for the week, Monday began quietly as the tone at the open wasn't ideal.

There was one sale from Progress Energy Carolinas, Inc., which does business as Carolina Power & Light Co. The utility sold $500 million of 10-year first mortgage bonds to repay debt.

Terms were also given for a sale of floating-rate notes done on Friday by General Electric Capital Corp.

Markets opened with pessimism on the health of the European economy and French banks in particular. There had been several calls made with interested issuers the previous Friday, although some were nervous then that market conditions weren't what they should be. All chose to stand down and see if conditions improved on Tuesday.

"If things are better tomorrow, we're going to be busy," one source said. "We were supposed to be busy starting today."

Up to $20 billion of supply was talked for the week following the previous week's more than $17 billion of new paper.

A syndicate source said that Tuesday is supposed to be "a crazy day" jammed with many of the issuers that were set to price bonds Monday but held back.

"Assuming the overnight market is OK, [it] should be busy," the source said. "We had a few stand down today, and other shops said they had 7 or 8 stand down already early this morning."

A few issuers are going to see how deals perform on Tuesday and then go Wednesday.

"[The market tone] got a little better on the China news," the syndicate source said, referring to Italy wanting China to buy some of its bonds. The stock markets also ended up slightly.

Investors were less confident on Monday in secondary trading.

The Markit CDX Series 16 North American high-grade index eased 4 bps on Monday to a spread of 136 bps, after rising 7 bps on Friday.

Trading stayed quiet, sources said. Overall trading volume fell about 10% to $8 billion on Monday.

"Low volume day," one trader said.

In the secondary market, the new issue from Progress Energy traded about 2 basis points tighter.

Confidence in the financial sector remained low on Monday. A trader saw bank credit default swaps costs rise on the day. Citi's CDS costs rose 13 bps to 253 bps, 263 bps. J.P. Morgan's CDS costs stayed flat 130 bps, 140 bps.

The brokerage firm/investment bank CDS costs also moved higher. Goldman Sachs' CDS costs rose 13 bps to 260 bps, 270 bps. Merrill Lynch's CDS costs traded up 5 bps to 398 bps, 418 bps. Morgan Stanley's CDS costs also were 13 bps higher at 338 bps, 348 bps.

The three-year Treasury yield rose 4 bps to 0.33%. The benchmark 10-year Treasury note yield climbed 4 bps to 1.95%. The long end of the bond curve was unchanged.

Carolina P&L's 10-years

Carolina Power & Light Co. priced $500 million of 3% 10-year first-mortgage bonds (A1/A-/A+) to yield Treasuries plus 110 bps, according to an FWP with the Securities and Exchange Commission.

Bookrunners were Bank of America Merrill Lynch, J.P. Morgan Securities LLC and RBS Securities Inc.

Proceeds are being used to repay outstanding short-term debt totaling $178 million and for general corporate purposes, including construction expenditures.

The issuer last priced bonds in a $600 million deal of 5.3% 10-year mortgage bonds on Jan. 8, 2009 at 285 bps over Treasuries.

In the secondary market, the new notes due 2021 firmed in light trading to 108 bps bid, 104 bps offered, a trader said.

The electric subsidiary of Progress Energy is based in Raleigh, N.C.

GE Capital gives terms

GE Capital sold $750 million of floating-rate notes due 2013 (Aa2/AA+) at par to yield Libor plus 60 bps, according to a 424B3 filing with the SEC.

Bookrunners were Bank of America Merrill Lynch and Citigroup Global Markets Inc.

The funding arm of General Electric Co. is based in Fairfield, Conn.

Paul Deckelman contributed to this review

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