RJS Power talks $1.25 billion five-year notes to yield 5¼%-5½%; pricing Wednesday

By Paul A. Harris

Portland, Ore., July 1 – RJS Power Holdings LLC talked its $1.25 billion offering of five-year senior notes (B1/BB-) to yield 5¼% to 5½%, according to market sources.

The deal is set to price Wednesday.

J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Goldman Sachs & Co. and Morgan Stanley & Co. LLC are the joint bookrunners for the Rule 144A and Regulation S for life offering.

Barclays, BNP Paribas Securities Corp., BofA Merrill Lynch, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Mitsubishi UFJ Securities and RBC Capital Markets are the co-managers.

The deal is structured as a five-year senior note with two years of call protection, with the notes becoming callable after two years at par plus 50% of the coupon. And the notes feature a 101% change-of-control put and high-yield covenants.

However if the merger of PPL Energy Supply LLC with RJS Power Holdings is consummated, the new entity, Talen Energy Corp., will be the issuer. In that event the deal will be structured as a five-year bullet with investment-grade covenants, and there will be no change-of-control put. In this scenario the coupon will feature a 50 basis points step-down in the event that combined ratings are better than either Ba2 from Moody’s Investors Service and BB- from Standard & Poor's, or Ba3 from Moody's and BB from Standard & Poor's.

The Maryland-based power producer plans to use the proceeds to repay bank debt.

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