EOG Resources, Franklin Resources, PSE&G, Kilroy price IG bonds in rough market; Treasuries up

By Andrea Heisinger and Cristal Cody

New York, May 17 - Public Service Electric & Gas Co., EOG Resources Inc., Franklin Resources, Inc. and Kilroy Realty LP issued bonds on a Monday that didn't have the greatest tone in the high-grade market.

Houston-based EOG Resources sold $1 billion of senior notes split evenly between five-year and 10-year tranches. They each priced in line with guidance.

The holding company for investment manager Franklin Templeton Investments sold an upsized $900 million of notes in three tranches. The size was increased from the original $750 million.

Public Service Electric & Gas priced $300 million of five-year first mortgage bonds and was the first deal of the day to price. The new 2.7% notes were tighter on the offer side, traders said.

There was one sale in the Rule 144A market for the day. That was a $250 million deal of 10-year notes from Kilroy Realty.

The market remained "a little rough" as issuers decided whether to brave the conditions or not. Some decided to price immediately, while others held off overnight.

Potential accounts were again met with continued worry over the health of eurozone countries, the oil spill in the Gulf of Mexico that was found to be worse than expected and continued government probes into large investment banks.

Issuance remains day to day, a source said, with the market still uncertain enough that most deals aren't announced until the morning of the day they're being priced.

The CDX Series 14 North American high-grade index eased 1 basis point to a mid bid-asked spread level of 109 bps, according to a source.

"In corps, spreads are a bit wider," a trader said.

Overall Trace volume in the investment-grade market fell more than 15% to a little more than $7 billion, a market source reported.

"Light volume," one source said.

U.S. Treasury prices were slightly higher on Monday, and yields eased as stocks closed higher while concerns continue with the eurozone's growth plans and the nearly daylong drop in the value of the euro against the dollar.

Yields on the five-year note were 5 bps weaker at 2.20%, while yields on the 10-year benchmark Treasury note eased 4 bps to 3.49%.

Yields on the 30-year bond rose 2 bps to 4.36%.

Treasury volume reportedly "was on the low side," a trader said.

EOG Resources sells $1 billion in two tranches

Oil and gas company EOG Resources priced $1 billion of senior unsecured notes (A3/A-) split evenly between two tranches, an informed source said.

A $500 million tranche of 2.95% five-year notes sold at a spread of Treasuries plus 80 bps. They priced in line with talk in the 80 bps area.

The $500 million tranche of 4.4% 10-year notes priced at a spread of 95 bps over Treasuries. The notes also priced in line with guidance in the 95 bps area.

Both tranches were firmer in the secondary, according to several sources.

"I saw that 2 basis points better. Both are a couple better," a trader said.

Near the session close, the five-year notes were quoted slightly firmer at 79 bps bid, 76 bps offered, another trader said.

The 10-year notes also were tighter and last seen at 94 bps bid, 91 bps offered.

Active bookrunners were Barclays Capital Inc., J.P. Morgan Securities and UBS Investment Bank.

Proceeds are being used for general corporate purposes, including the repayment of outstanding commercial paper and borrowings under an uncommitted credit facility.

The issuer is based in Houston.

EOG Resources 2 bps better

IG market opens week low

There was a respectable amount of deals priced to start the week in the high-grade bond market, but the coming few days remain up in the air.

"[The tone] was pretty soft," a source said at the end of the day, referring to what the market was like when it opened.

"There's a lot of overhang. The [guidance] whispers are a little wider."

Although some issuers have been on hold due to a bunch of pressures hanging over the bond market, others have decided to brave it out of necessity, or because there are still many people with cash at the ready to buy bonds.

"We have deals getting done, but there are no blowouts [on the books], that's for sure," the source said.

As was the case in the previous week, it's a day-to-day market with deals announced the day they're going to price.

"Nobody's really planning ahead," a syndicate source said. "It's kind of bumpy."

The first source said that everyone has to "assess the market every morning."

Franklin Resources upsizes three-tranche deal

Franklin Resources sold an upsized $900 million of unsecured notes (A1/AA-) in three tranches late in the day, a source away from the sale said.

The size was increased from $750 million, another source said, with the deal pricing right after 5 p.m. ET.

The $300 million of 2% three-year notes priced at a spread of Treasuries plus 75 bps.

A $250 million tranche of 3.125% five-year notes sold at Treasuries plus 95 bps.

The $350 million of 4.625% 10-year notes priced at a 115 bps over Treasuries spread.

Bookrunners were Bank of America Merrill Lynch and Morgan Stanley & Co. Inc.

Proceeds will be used for general corporate purposes, including repayment of previously issued commercial paper.

The holding company for investment manager Franklin Templeton Investments is based in San Mateo, Calif.

Kilroy Realty taps 144A market for $250 million

Kilroy Realty priced $250 million of 6.625% 10-year senior unsecured notes (Baa3/BBB-) to yield Treasuries plus 325 bps, a source who worked on the sale said.

They were sold under Rule 144A and are guaranteed by Kilroy Realty Corp. on a senior unsecured basis.

Bank of America Merrill Lynch, J.P. Morgan Securities and Barclays Capital were bookrunners.

Proceeds are going to repurchase outstanding 3.25% exchangeable senior notes due in 2012 that are tendered by the holders pursuant to the offer to purchase such exchange notes.

The real estate investment trust is based in Los Angeles.

PSE&G prices five-year notes

Newark, N.J.-based energy company Public Service Electric & Gas priced $300 million of 2.7% five-year first mortgage bonds (A2/A-/A) by early afternoon at Treasuries plus 62 bps, a source close to the sale said.

Bookrunners were Barclays Capital Inc. and Deutsche Bank Securities Inc.

"Those came in at 62 and I saw them going out at 62, 58," said a trader who follows the industrial sector.

The notes hovered at 62 bps bid, 58 bps offered through late afternoon trading, according to another source.

But as the market closed, one trader saw the notes "trading at 62, 56."

Proceeds will be added to the company's general fund and used for general corporate purposes, including repayment of short-term debt consisting of commercial paper.

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