Duke Energy, SC E&G lead utility issuers; Zions upsizes; new issues tighten amidst muted tone

By Aleesia Forni and Andrea Heisinger

New York, June 10 - A handful of mostly utility names came to the investment-grade bond market on Monday as opportunistic issuers sat on the sidelines.

Investors continued to seek out high-grade bonds, as evidenced by the upsizing of trades from Duke Energy Corp. and South Carolina Electric & Gas Co.

Duke sold $500 million of five-year senior notes. The size was increased from $350 million.

A $400 million sale of 30-year first mortgage bonds from South Carolina Electric was increased in size from $300 million, a source said.

Elsewhere in the market, Wisconsin Electric Power Co. priced $250 million of five-year debentures.

Zions Bancorporation sold $300 million of 10-year senior notes. The size was increased from $250 million.

Gulf Power Co. quickly priced a $90 million sale of 30-year senior notes.

The tone of the primary was "a little bit better" than where it ended on Friday, a market source said late in the day.

"We retraced some [losses]," the source added.

Helping improve investor sentiment was the move by Standard & Poor's Ratings Agency to move its credit ratings watch on the United States to stable from negative.

Still, a modest week of between $10 billion and $15 billion is expected by most syndicate desks, with supply heavy on industrial names.

The preferred stock market continued its active streak.

Apollo Investment Corp. sold $135 million of $25-par senior notes due 2043. The size was increased from a minimum of $100 million.

A trader saw the issue trading around $24.57 in the midday gray market.

After pricing, the trader quoted the issue at $24.60 bid, $24.62 offered.

Another market source pegged the notes at $24.70 to $24.75 bid, $24.80 offered, noting that the issue was trading lower during the day.

The Markit CDX Series 20 North American Investment Grade index was 3 basis points wider compared to Friday's close at a spread of 84 bps.

Activity in the investment-grade secondary market was muted to start the week, market sources said.

"Weaker tone going out the door on light volumes," one trader said near the session's close.

South Carolina Electric's notes were quoted 2 bps better near the end of the day's trading, while Duke Energy's notes traded 5 bps tighter.

Duke prices five-year notes

Duke Energy tapped the market for an upsized $500 million of 2.1% five-year senior notes (Baa2/BBB/BBB+) priced at Treasuries plus 100 bps, according to an FWP filing with the Securities and Exchange Commission.

The notes were quoted at 95 bps bid, 92 bps offered.

Goldman Sachs & Co., Mizuho Securities USA Inc. and RBC Capital Markets LLC were bookrunners.

Proceeds are being used to repay at maturity $250 million of 5.65% senior notes due June 15 and for general corporate purposes, including repayment of outstanding commercial paper.

The diversified energy company is based in Charlotte, N.C.

SC Electric upsizes

South Carolina Electric & Gas sold an upsized $400 million of 4.6% 30-year first mortgage bonds (A2/A/A) at a spread of Treasuries plus 128 bps, an informed source said.

The size was increased from $300 million. Guidance was in the 130 bps area.

A trader quoted the notes 2 bps better at 126 bps bid, 124 bps offered.

Active bookrunners were BofA Merrill Lynch, Morgan Stanley & Co. LLC and UBS Securities LLC. Passives were Mizuho Securities USA and TD Securities (USA) LLC.

Proceeds are being used to pay at maturity $150 million of 7.125% mortgage bonds due June 15, 2013, to repay short-term debt primarily incurred as a result of a construction program, to finance capital expenditures and for general corporate purposes.

The Cayce, S.C.-based utility was last in the market on July 10, 2012 with a $250 million reopening of 4.35% bonds due in 2042.

Zions sells $300 million notes

Zions Bancorporation sold an upsized $300 million of 4.5% 10-year senior notes (/BBB-/BBB-) at a spread of 232 bps over Treasuries, a market source said.

The notes were sold tight to talk in the 235 bps area, the source said. The size was increased from $250 million.

Active bookrunners were Deutsche Bank Securities Inc., Goldman Sachs and J.P. Morgan Securities LLC. Passives were Macquarie Capital (USA) Inc. and Zions Direct Inc.

Proceeds are being used for general corporate purposes, including the redemption or repurchase of some securities.

The financial holding company is based in Salt Lake City.

Wepco prices tight

Wisconsin Electric Power completed a $250 million trade of 1.7% five-year debentures (A2/A-/A+) at a price of Treasuries plus 58 bps, according to an FWP filing with the SEC.

The bonds were sold tight to guidance in the 60 bps area, a market source said.

Bookrunners were JPMorgan, KeyBanc Capital Markets Inc. and Wells Fargo Securities LLC.

Proceeds are being used to repay short-term debt and for working capital and other general corporate purposes.

Wisconsin Electric was last in the U.S. bond market with a $250 million offering of 30-year bonds on Dec. 5, 2012.

The energy company is based in Milkwaukee.

Gulf Power sells long bond

Gulf Power sold $90 million of 5% 30-year senior notes (A3/A/A) to yield Treasuries plus 165 bps, according to an FWP filing with the SEC.

Wells Fargo Securities was bookrunner.

Proceeds are being used to repay at maturity $60 million of 4.35% notes due July 15, 2013, to possibly pay a portion of a $125 million bank loan maturing in September 2013 or for the proposed redemption of $30 million of 5.25% notes due July 15, 2033.

Gulf Power last tapped the U.S. bond market with a $100 million sale of 10-year notes on May 15, 2012.

The electric utility subsidiary of the Southern Co. is based in Pensacola, Fla.

Apollo sells $25-par

Apollo Investment priced $135 million of 6.875% $25-par senior notes due July 15, 2043 (expected ratings: BBB/BBB-), a market source said.

Price talk was 6.875% to 7%, a trader said.

Morgan Stanley, BofA Merrill Lynch and UBS Securities were the joint bookrunning managers.

Apollo plans to list the notes on the New York Stock Exchange under the ticker symbol "AIY."

The New York-based closed-end, externally managed non-diversified management investment company will use funds raised in the offering to repay indebtedness under a senior secured facility.

Stephanie N. Rotondo contributed to this review.

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