American Water prices; rush of issuance to continue in week ahead; bonds firm in thin trading

By Cristal Cody and Aleesia Forni

Virginia Beach, Nov. 8 - A lone deal from American Water Capital Corp. was the only action that took place on a typically quiet Friday, capping off a mammoth week of issuance for the high-grade primary market.

In the deal announced on Thursday, American Water Capital brought a $400 million issue of 3.85% long 10-year notes to market at Treasuries plus 115 basis points, according to a market source.

The new deal brought supply to more than $33 billion, exceeding expectations of $20 billion to $25 billion of new paper.

Sources are expecting the rush of new issuance to continue in the Veterans Day holiday-shortened week ahead.

One source pegged supply at $20 billion, while another predicted $15 billion to $20 billion.

Bonds traded flat to tighter in light activity on Friday in front of a three-day holiday weekend, market sources said.

"A lot of people have left already," one source said. "It's definitely a quiet close here."

The Markit CDX North American Investment Grade series 21 index firmed 2 bps to a spread of 72 bps.

In the secondary market, Verizon Communication Inc.'s $49 billion eight-tranche offering of notes (Baa1/BBB+/A-) priced in September remains actively traded, but mostly unchanged on the day, a trader said.

"The long end is maybe a basis point wider," the trader said. "The rest of the curve is unchanged."

American Water's $400 million

Friday's primary saw American Water Capital price a $400 million issue of 3.85% senior notes due March 1, 2024 (Baa2/BBB+/) with a spread of Treasuries plus 115 bps, according to a market source and an FWP filed with the Securities and Exchange Commission.

The notes were sold in line with talk.

Pricing was at 99.601 to yield 3.898%.

Bookrunners were J.P. Morgan Securities LLC, UBS Investment Bank and Wells Fargo Securities LLC.

Santander, Mitsubishi UFJ Securities, Williams Capital Group LP, Blaylock Robert Van LLC, C.L. King & Associates, Loop Capital Markets LLC, MFR Securities Inc. and Mischler Financial Group Inc. were the co-managers.

Proceeds will be used to finance redemptions of some long-term debt and to fund repayment of short-term debt.

The investor-owned water and wastewater utility company is based in Voorhees, N.J.

Verizon flat to wider

Verizon's tranche of 6.55% bonds due 2043 headed out flat at 141 bps bid, 136 bps offered on Friday, a trader said.

The long bonds have tightened from where the issue traded in late October at 178 bps bid, 176 bps offered.

Verizon sold $15 billion of the 30-year bonds with a spread of Treasuries plus 265 bps on Sept. 11.

The telecommunications company is based in New York City.

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