Abbott Labs, Georgia Power, Empire District Electric price bonds; Treasuries tighten up

By Andrea Heisinger and Cristal Cody

New York, May 24 - Abbott Laboratories, Georgia Power Co. and Empire District Electric Co. priced bonds on an otherwise shaky high-grade bond market on Monday.

The largest sale in recent weeks came from Abbott Labs with its $3 billion deal in three tranches.

"It smoked the competition," a syndicate source said of the sale.

Georgia Power priced its $600 million deal quickly, upsizing the 30-year bonds from $350 million.

Another utility offering came from Empire District Electric. The Missouri-based issuer sold $100 million of 10-year first mortgage bonds.

Despite worries about the continuing debt crisis in Europe and the oil spill in the Gulf of Mexico, there were no fears about issuing bonds to start the week.

"As everyone keeps saying - there are still a lot of people to buy this," said one market source. He specifically mentioned the Abbott Labs deal as one of the most watched for the day.

At $3 billion, it is one of the largest to be priced recently. The last large corporate sale came from NBC Universal, Inc. on April 27, when the media company priced $4 billion in three tranches.

The three new high-grade tranches from Abbott tightened in secondary trading on Monday, while Georgia Power's offering firmed slightly on the offer side, traders said.

The CDX Series 14 North American high-grade index moved out 3 basis points to a mid bid-asked spread level of 123 bps, according to a market source.

Overall investment-grade Trace volume fell more than 13% to about $8 billion, a source said.

Treasuries were tighter while the euro fell as the Bank of Spain took over savings bank CajaSur in the wake of a failed merger with another Spanish lender.

Yields on two-year notes firmed 2 bps to 0.73%, while 10-year notes were 3 bps tighter at 3.20%.

Yields on 30-year bonds strengthened 1 bp in trading to 4.09%.

Coming up, the Treasury Department plans to sell $42 billion of two-year notes on Tuesday, $40 billion of five-year notes on Wednesday and $31 billion of seven-year debt on Thursday.

Abbott Labs prices $3 billion in three tranches

Pharmaceutical health care company Abbott Laboratories sold $3 billion of senior unsecured notes (A1/AA) in three tranches by late afternoon, an informed source said.

The $750 million of 2.7% five-year notes sold at a spread of Treasuries plus 70 bps. They came in at the tight end of guidance in the range of 70 bps to 75 bps.

A $1 billion tranche of 4.125% 10-year notes priced at Treasuries plus 90 bps. This tranche also priced at the tight end of talk between 90 bps and 95 bps.

The third tranche was $1.25 billion of 5.3% 30-year bonds priced at a spread of 122 bps over Treasuries. The 30-year bonds priced in line with guidance in the 125 bps area.

The 2.7% notes immediately tightened in secondary trading. The five-year notes were first seen trading at 67 bps bid, 63 bps offered, one trader said.

As the market was closing, the notes were slightly wider at 68 bps bid, 64 bps offered, another trader said.

In addition, Abbot's 4.125% notes were tighter and then wider in trading, sources said. The 10-year notes firmed to 88 bps bid, 84 bps offered and then later were seen trading at 90 bps bid, 85 bps offered.

The third tranche of 5.3% bonds was slightly firmed on the offer side, one trader said. The bonds were quoted at 122 bps bid, 117 bps offered.

According to data from Prospect News, the company last sold bonds on Feb. 26, 2009. That deal, too, totaled $3 billion in tranches of 10-year and 30-year notes.

Those 10-year notes priced considerably higher at 220 bps over Treasuries, while the 30-year bonds sold at Treasuries plus 235 bps.

"New issue concessions are definitely [in their] favor right now," a source said in an e-mail message.

The company has been in the news lately due to its acquisition of part of Piramal Healthcare in India and Solvay Pharmaceuticals in Belgium.

Bank of America Merrill Lynch, J.P. Morgan Securities and Morgan Stanley & Co. Inc. were active bookrunners.

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

The issuer is based in Abbott Park, Ill.

Issuers forge ahead in soft market

Some issuers remain jittery about pricing bonds in the market with so many bad headlines floating around, but others in the utility and energy fields are pricing anyway.

"They're getting good concessions," a source said at the end of the day about the utility names that have been issuing recently.

The Abbott Labs deal also brought some life back to the high-grade primary. Books for it were "well oversubscribed," a source said, although just how much was not specified.

It also left some accounts happy, as new high-grade bonds have come into the market at a trickle for several weeks and have mostly been smaller deals.

Another source simply said he was happy to have "some new bonds to look at" and added that all of the day's sales seemed to go well.

No upcoming bond sales have been announced, but there are some expected on Tuesday and possibly Wednesday.

"The market won't be empty," the second source said.

Georgia Power prices upsized 30-year notes

Georgia Power priced an upsized $600 million of 5.4% 30-year senior unsecured notes (A2/A/A+) by early afternoon to yield Treasuries plus 135 bps, an informed source said.

The size was initially $350 million.

The bonds were seen slightly firmer on the offer side in secondary trading, a source said.

Late afternoon, the 30-year bonds were quoted at 135 bps bid, 133 bps offered.

Near the session close, the bonds were seen tightening on the offer side.

"Saw the Georgia Power at 133, 131," a trader said.

Bookrunners were Bank of America Merrill Lynch, Goldman Sachs & Co., J.P. Morgan Securities, RBS Securities and SunTrust Robinson Humphrey.

Proceeds will be used to redeem all or a portion of the $200 million of 6% senior notes due on Oct. 15, 2033 as well as the $150 million of 5.9% notes due April 15, 2033, to repay part of $322 million of short-term debt and for general corporate purposes including construction.

The subsidiary of the Southern Co. is based in Atlanta.

Empire District Electric sells $100 million

Empire District Electric priced $100 million of 4.65% 10-year first mortgage bonds (A3/BBB+) to yield Treasuries plus 145 bps.

Bank of America Merrill Lynch and Wells Fargo Securities ran the books.

Proceeds are being used to redeem trust preferred securities and repay short-term debt to fund at maturity the company's 6.55 first mortgage bonds due in 2010.

The electric, gas and water utility is based in Joplin, Mo.

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