Sempra, Southwest Gas tap market as issuance fizzles; Great Plains Energy trades better

By Andrea Heisinger and Cristal Cody

New York, March 20 - Utilities had a monopoly on the high-grade bond primary market as Southwest Gas Corp. and Sempra Energy priced paper on Tuesday.

San Diego-based Sempra sold an upsized $600 million of five-year paper. The deal size was increased by $250 million.

Southwest Gas sold $250 million of 10-year senior notes. Sempra priced $350 million of five-year paper a day after subsidiary San Diego Gas & Electric Co. priced $250 million of 30-year first mortgage bonds.

The sovereign side of the market saw a deal of floating-rate notes from Kommunalbanken AS. The financial priced $300 million of five-year notes.

A deal of $25-par 60-year junior subordinated debentures was announced by NextEra Energy Capital Holdings Inc.

There was some surprise about the day's short supply of new paper in the primary market.

"We were looking at $15 [billion] to $20 [billion], and it didn't all come yesterday," a source said, referring to issuance estimates for the week and the volume of deals pricing on Monday.

Another source who worked on one of the day's trades called the day "kind of odd" and said that there was at least one issuer who opted to stand down rather than price bonds.

"The tone was not as positive as people hoped," the source said. "There was a weaker open in credit - not really any headlines or anything."

The issuers who stood down for the day are expected to take a second look at Wednesday and will likely issue if the tone is acceptable, sources said.

The Markit CDX Series 18 North American investment-grade index eased 3 basis points to a spread of 88 bps.

Great Plains Energy Inc.'s new bonds traded 12 bps better in the secondary market, while Southwest Gas' new notes tightened 9 bps late afternoon.

Sempra Energy's notes traded about 3 bps tighter.

Husky Energy Inc.'s bonds priced the previous day widened about 2 bps in secondary trading.

Morgan Stanley's notes sold on Monday traded unchanged going out in Tuesday's session.

Bank of America's new notes traded 3 bps better on the day and 10 bps tighter from issuance.

Rio Tinto Finance (USA) plc's tranche of notes due 2022 sold on Monday widened 5 bps in Tuesday's trading session.

Royal Bank of Canada's short-dated notes firmed 5 bps in the secondary.

Trading was "up and down" over the day, a trader said.

"It was quiet in the morning and things picked up in the afternoon," the trader said.

Bonds in the telecommunication sector were unchanged to 3 bps wider going out the door.

AT&T, Inc.'s 5.8% notes due 2019 (A2/A-) eased 1 bp to 57 bps on the day.

Treasuries traded better late in the day. The benchmark 10-year note yield fell 1 bp to 2.36%. The 30-year bond yield dropped 4 bps to 3.44%.

Sempra upsizes

Sempra Energy sold an upsized $600 million of 2.3% five-year notes (Baa1/BBB+/BBB+) to yield 110 bps over Treasuries, a market source said.

The deal size was increased from $350 million, the source said. The paper was sold at the tight end of guidance in the 115 bps area, plus or minus 5 bps.

There was about $1.5 billion in demand on the books, the market source said, adding that the deal went well.

"There was room to grow, and the company decided [to upsize]," the source stated.

Bookrunners were Bank of America Merrill Lynch, J.P. Morgan Securities LLC and Wells Fargo Securities LLC.

Proceeds are being used for general corporate purposes including repayment of commercial paper.

Sempra Energy's notes due 2017 firmed in trading to 107 bps bid, 102 bps offered late afternoon, a trader said.

The holding company for utility subsidiaries is based in San Diego.

SW Gas sells 10-years

Southwest Gas sold $250 million of 3.875% 10-year senior notes at a spread of Treasuries plus 150 basis points, a market source said.

The notes (Baa1/BBB+/BBB+) were priced at 99.966 to yield 3.879%. There is a make-whole call at 25 bps over Treasuries.

BNY Mellon Capital Markets LLC, Bank of America Merrill Lynch and J.P. Morgan Securities LLC were bookrunners.

Co-managers were Wells Fargo Securities LLC, Blaylock Robert Van LLC and Samuel A. Ramirez & Co.

Proceeds are being used in connection with a $200 million repayment of 7.625% senior notes maturing on May 15 and for general corporate purposes.

The 3.875% notes due 2022 from Southwest Gas traded stronger at 141 bps bid, 136 bps offered in the secondary market, a trader said.

The natural gas distributor is based in Las Vegas.

Kommunalbanken floaters

Norway's Kommunalbanken sold $300 million of five-year floaters (Aaa/AAA/) at 99.901 with a coupon of Libor plus 38 bps, a market source said.

Bookrunners were Deutsche Bank Securities Inc., Goldman Sachs & Co. and HSBC Securities (USA) Inc.

The bank provides low-cost funding to municipalities and is based in Oslo.

Great Plains remarkets notes

Great Plains Energy priced $287.386 million of 5.292% 10-year senior notes in a remarketing, according to an FWP with the Securities and Exchange Commission.

The deal was a remarketing of 10% subordinated notes due 2042.

The senior notes (Baa3/BBB-/) were priced at 102.291, plus accrued interest at 10% from March 15 to March 22, with a coupon of 5.292% and a spread of 262.5 bps over Treasuries.

Goldman Sachs & Co. and J.P. Morgan Securities LLC were bookrunners.

Great Plains Energy's 5.292% notes due 2022 traded better at 250 bps bid, 240 bps offered, according to a trader.

The holding company for utility subsidiaries is based in Kansas City, Mo.

NextEra preps $25-par deal

NextEra Energy Capital Holdings - formerly known as FPL Group Capital Inc. - is planning to sell at least $150 million of $25-par series G junior subordinated debentures due March 1, 2072.

Price guidance is around 5.75%, a trader reported.

NextEra Energy Inc. will guarantee the notes, according to a prospectus filed with the SEC.

NextEra will apply to list the baby bonds on the New York Stock Exchange.

Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC are bookrunners.

The company expects to use proceeds to repay a portion of its total outstanding commercial paper obligations and for other general corporate purposes.

NextEra Energy is based in Juno Beach, Fla.

Husky eases

Husky Energy's 3.95% senior notes due 2022 traded wider at 162 bps bid, 159 bps offered on Tuesday, a trader said.

The company sold $500 million of the 10-year notes (Baa2/BBB+/) at Treasuries plus 160 bps on Monday.

Husky had not been in the U.S. market with a bond offering since May 6, 2009, when the company sold $1.5 billion of five- and -10-year notes.

The petroleum company is based in Calgary, Alta.

Morgan Stanley flat

Morgan Stanley's 4.75% senior notes due 2017 traded flat at 363 bps bid, 358 bps offered, a trader said on Tuesday.

Morgan Stanley sold $2 billion of the five-year notes (A2/A-/A) to yield Treasuries plus 360 bps on Monday.

Morgan Stanley & Co. LLC ran the books.

The financial services company is based in New York City.

Bank of America better

Bank of America's 3.875% notes due 2017 firmed to 265 bps bid, 262 bps offered on Tuesday, according to a trader.

Bank of America sold $1.25 billion of the five-year notes (Baa1/A-/A) at a spread of Treasuries plus 275 bps on Monday.

The financial services company is based in Charlotte, N.C.

Rio Tinto Finance weaker

Light activity was seen in the secondary market in the four tranches that Rio Tinto Finance (USA) sold in a $2.5 billion offering of senior notes (A3/A-/) on Monday.

The tranche of 3.5% notes due 2022 traded early in the day wider at 125 bps bid, 120 bps offered, a trader said.

Rio Tinto Finance sold $1 billion of the 10-year notes at Treasuries plus 120 bps.

The mining company is based in Melbourne and London.

Royal Bank of Canada firms

In other trading, Royal Bank of Canada's 1.45% notes due 2014 (Aa1/AA-/AA) firmed 5 bps to 60 bps on Tuesday in the U.S. high-grade market, according to a bond source.

The Royal Bank of Canada sold $1.25 billion of the senior notes on Oct. 26 at a spread of Treasuries plus 105 bps.

The financial services company is based in Toronto.

Stephanie N. Rotondo contributed to this review

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