By Paul A. Harris
St. Louis, Dec. 5 - Basin Electric Power Cooperative privately placed $150 million of first-mortgage bonds (NAIC-1) in two tranches via placement agent J.P. Morgan Securities Inc., according to an informed source.
The placement includes $50 million of 7.69% 20-year bonds with a 10-year average life and $100 million of 8.2% 30-year bonds with an 18-year average life.
Both issues of notes came at 450 basis points spreads to respective Treasuries.
The Bismarck, N.D.-based consumer-owned regional electric cooperative had been marketing up to $250 million of the bonds at Treasuries plus the low 400 bps area, according to a market source.
JPMorgan was the placement agent.
Proceeds will be used to fund power plant construction.
The deal went to the private placement market after the company tested the waters of the high-grade corporate bond market with a proposed $250 million deal in the fall, according to a company source.
That foray was enough to convince the Basin Electric brass that a straight corporate deal, if executed, would result in onerous rates far above those which the A rated cooperative sector was accustomed to paying.
The source mentioned one straight corporate deal from a similarly rated entity in a similar sector that priced with a yield that was dramatically higher than any seen previously by A rated utilities.
The source declined to identify the issuer. However during the time-frame that the source specified, the National Rural Utilities Cooperative Finance Corp. priced $1 billion of 10 3/8% collateral trust bonds (A1/A+/A+) to yield 10½%, a 680.1 bps spread to Treasuries.
Basin Electric will possibly return to the market during the first quarter of 2009 for the remaining $100 million of its original financing goal, according to a market source, who added that the $150 million deal that Basin took across the finish line was the first such placement to top the $100 million mark since September.
| Issuer: | Basin Electric Power Cooperative
|
| Total amount: | $150 million
|
| Security description: | First-mortgage bonds
|
| Placement agent: | J.P. Morgan Securities Inc.
|
| Expected rating: | NAIC-1
|
|
|
| 20-year bonds
|
| Amount: | $50 million
|
| Average life: | 10 years
|
| Coupon: | 7.69%
|
| Spread: | 450 bps
|
|
|
| 30-year bonds
|
| Amount: | $100 million
|
| Average life: | 18 years
|
| Coupon: | 8.2%
|
| Spread: | 450 bps
|
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