S.C. Johnson, VEPCo, SoCal Edison, Kimco, Idaho Power price; secondary market wider on day

By Andrea Heisinger and Cristal Cody

New York, Aug. 25 - Virginia Electric & Power Co., Southern California Edison Co., S.C. Johnson & Son Inc., Idaho Power Co. and Kimco Realty Corp. got deals done on Wednesday, with the largest volume of sales so far this week.

Virginia Electric & Power was one of the first to price its bonds. The utility sold $300 million of 12-year notes at the tight end of guidance.

Those bonds were followed by Southern California Edison, which sold $500 million of 30-year mortgage bonds.

Kimco priced its second deal in the investment-grade bond market for the week. The real estate investment trust sold an upsized $300 million of notes due 2018, which followed Monday's sale of preferred shares.

Idaho Power priced a $200 million deal in two tranches. The sale was split evenly between two maturities.

The largest deal of the day was an upsized $550 million of 30-year bonds from S.C. Johnson that was priced in line with talk late in the afternoon.

The new energy debt sold on Wednesday was tighter in secondary trading, but overall, the secondary was weaker, according to sources.

"Generally about five wider," a trader said.

The Markit CDX Series 14 North American investment-grade index eased 1 point to a spread of 113 bps on Wednesday, according to Markit Group Ltd.

Another trader said that high-grade bonds in the metals and mining sectors were more than 5 bps weaker in trading.

Overall investment-grade Trace volume moved up 3% to just under $11 billion, a market source said.

Treasuries sold off as stocks rallied on Wednesday.

"We had a surge in Treasury prices that pretty much started in the morning and, later in the day, we saw a sell-off of the 30-year bond," a trader said.

The 30-year bond traded in a range from a yield of 3.48% early morning to closing up 1 bp from the previous day at a yield of 3.57%.

The benchmark 10-year note also registered a reversal on the day. The yield on the benchmark 10-year note rose 4 bps to 2.53%.

S.C. Johnson's $550 million

S.C. Johnson & Son priced a slightly upsized $550 million of 4.8% 30-year bonds to yield 130 bps over Treasuries, a source who worked on the trade said.

The size was increased by $50 million at the launch from $500 million. The notes priced in line with talk of 130 bps, and the sale was about two times oversubscribed.

The bonds (/A-/A-) were sold under Rule 144A and faced some challenges in pricing. One of those challenges was that "investors were not overly familiar with the credit," a syndicate source said.

"They haven't issued since 2003, and then there was the matter of the issue being sold privately," sources said.

Despite the fact that the company was initially set on selling $500 million, it was convinced to get an extra $50 million done, the source said.

Bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets and Morgan Stanley & Co. Inc.

Proceeds are going for working capital and general corporate purposes, including replenishing cash at hand and short-term investments to fund the cost of the company's acquisition of Sara Lee Corp.'s household insecticide business. They will also be used to pay down $350 million of long-term debt as it matures through Dec. 2012.

The consumer products company is based in Racine, Wis.

VEPCo sells $300 million

Virginia Electric & Power priced $300 million of 3.45% 12-year senior notes (Baa1/A-/A-) at Treasuries plus 100 bps, according to a market source and an FWP filing with the Securities and Exchange Commission.

The notes priced in line with talk at 100 bps.

Bookrunners were Bank of America Merrill Lynch, RBS Securities and Wells Fargo Securities LLC.

Proceeds are being used for general corporate purposes, including the prefunding of fourth-quarter capital needs and repayment of short-term debt, which encompasses intercompany debt owed to parent company Dominion Resources Inc.

The notes due 2022 narrowed in the secondary market, according to sources.

Soon after pricing, the notes were seen tightening to 97 bps bid, 94 bps offered.

Virginia Electric's last deal was $350 million of 5% 10-year notes priced on June 23, 2009 at 137.5 bps over Treasuries.

The electric utility is based in Richmond, Va.

Market ahead seen quiet

The deals on Wednesday may be the last rush for a while, a source said at the end of the day after five bond offerings had priced.

"I would say after today it's going to be quiet," the source said. "It's difficult to get in front of investors [next week]."

Companies may also be unwilling to price bonds in the coming week as people take vacations and syndicate desks thin out.

There also may be some lost confidence in the market tone, as it dipped at the open, and some are wondering how long issuers can keep getting such low interest rates.

"It was a slower start this morning," a source who worked on two of the day's deals said. "It was a weaker market, too."

Kimco notes due 2018

Kimco Realty sold an upsized $300 million of 4.3% series E medium-term unsecured notes due 2018 (Baa1/BBB+/BBB+) at Treasuries plus 240 bps, a source who worked on the trade said.

The size was increased from $250 million, and the deal priced in line with guidance in the mid- to low 200 bps.

"I would say the sale went very good," the source said. "It was two to three times oversubscribed."

Citigroup Global Markets, Deutsche Bank Securities and J.P. Morgan Securities were bookrunners.

Proceeds will be used to repay $100 million of 5.304% medium-term notes due Feb. 2011 and $150 million of 7.95% notes due April, 2011 in accordance with optional make-whole redemption provisions of the notes. They will also be used for general corporate purposes.

It is the company's second time tapping the debt market this week, with a $100 million sale of perpetual preferred stock on Monday.

Those preferreds are lower in the company's capital structure, and "they like to get their name out there on multiple channels," a source said, adding that it's not unusual for a company to issue different kinds of debt in a short period of time.

The real estate investment trust is based in New Hyde Park, N.Y.

SoCal Edison's 30-years

Southern California Edison priced $500 million of 4.5% 30-year first- and refunding mortgage bonds, series 2010B, (A1/A/A+) by mid-afternoon at 100 bps over Treasuries, an informed source said.

Bank of America Merrill Lynch, Deutsche Bank Securities, UBS Investment Bank and Wells Fargo Securities LLC ran the books.

Proceeds will be used to repay commercial paper or for general corporate purposes.

The new bonds due 2040 traded tighter in the secondary market soon after pricing, sources said. The notes were seen firming to 97 bps bid, 94 bps offered, one trader said.

"They were 97, 95 and last at 96, 94," another trader said late in the day.

The company's last deal was $500 million of 5.5% 30-year bonds priced on March 8 at a comparable 90 bps over Treasuries.

The electric subsidiary of Edison International is based in Rosemead, Calif.

Idaho Power prices two tranches

Boise-based electric utility Idaho Power sold $200 million of notes (A2/A-/A-) in two tranches, a source close to the sale said.

The deal was announced in early afternoon and priced a couple of hours later.

A $100 million tranche of 3.4% 10-year notes priced at a spread of Treasuries plus 95 bps.

The second tranche was $100 million of 4.85% 30-year bonds priced at a spread of Treasuries plus 130 bps.

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

In the secondary market, both tranches firmed in trading.

The note due 2020 was stronger at 93 bps bid, 90 bps offered, a trader said.

The tranche of bonds due 2040 was last seen trading at 128 bps bid, 125 bps offered.

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