Gulf Power, Public Storage price deals; market wary of Treasury sales; trading volume 'decent'

By Andrea Heisinger and Cristal Cody

New York, April 6 - Gulf Power Co., Public Storage and Senior Housing Properties Trust were the only deals to price on Tuesday, and other upcoming sales were announced for the investment-grade market.

Electricity provider Gulf Power sold $175 million of 10-year notes in a quick sale that was done by early afternoon.

Perpetual cumulative preferred stock was sold by Public Storage in deal totaling $140 million.

Senior Housing Properties priced a split-rated sale of notes late in the afternoon. The real estate investment trust priced an upsized $200 million of 10-year notes tight to guidance.

Southern Copper Corp. announced a sale of notes in 10-year and 30-year maturities early in the day. Pricing is not expected until the end of the week or early in the coming week following a roadshow.

The Province of Ontario also is planning a sale. It was announced that the province would issue a minimum of $1 billion of 10-year notes on Wednesday.

Royal Bank of Canada is set to sell five-year notes on Wednesday.

New deals are expected to be a little more plentiful in the next day or two, sources said.

The high-grade secondary market on Tuesday was "very quiet," one trader said. "Almost too quiet to see much move in spreads."

The CDX Series 14 North American high-grade index was "unchanged" on Tuesday, a source said.

The index closed unchanged from Monday at a mid bid-asked spread level of 84 basis points, according to a source.

Still, "volume's decent," a trader said.

Overall Trace volume jumped about 48% on Tuesday to more than $12 billion, a source said.

Meanwhile, U.S. Treasuries were stronger on Tuesday after weakening the day before.

The yield on the 10-year benchmark Treasury note tightened 4 bps to 3.95%, while the yield on the 30-year Treasury bond firmed 1 bp to 4.83%.

In secondary trading, the new 10-year notes from Gulf Power traded about 6 bps tighter, while Goldman Sachs Group, Inc.'s 10-year notes traded firmer, according to sources.

Gulf Power prices small deal

Florida-based Gulf Power sold $175 million of 4.75% 10-year senior unsecured notes (A2/A/A) early in the day to yield Treasuries plus 80 bps, according to an FWP filing with the Securities and Exchange Commission.

They priced in line with guidance in the 80 bps area, a source said, with a launch at 80 bps over Treasuries soon after.

It was a "small deal, sub-index eligible," a source who worked on it said. It was subscribed and priced quickly in order to get the sale done before the mid-afternoon three-year Treasury note auction.

Citigroup Global Markets, UBS Investment Bank and Wells Fargo Securities were the bookrunners.

The proceeds will be used to repay $140 million in floating-rate notes due June 28, to repay short-term debt and for general corporate purposes.

The electric subsidiary of Southern Co. is based in Pensacola.

Public Storage sells preferreds

REIT Public Storage priced $140 million, or 5.6 million, 6.875% depository shares of perpetual cumulative preferred stock at par of $25, an informed source said.

There is an over-allotment option for 840,000 shares.

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

Proceeds will be used for general corporate purposes including redeeming certain preferreds and making investments in self-storage facilities and entities that own them.

The self-storage unit REIT is based in Glendale, Calif.

Investors wary

The slow trickle of new high-grade bond deals continued amid negative headlines and wariness over Treasury auctions, sources said late in the day.

There are a couple of new deals lined up for Wednesday, with more for later in the week, one market source said. He said that in addition to the sales from Royal Bank of Canada and Ontario that have been announced, there are at least a couple more that have not been made public yet.

Some traders and buyers are still on vacation from Easter - especially in Europe - a source said, which along with those out for Passover have left desks lightly staffed.

There are also a string of Treasury note auctions this week, beginning with the three-year note sale on Tuesday.

"The Treasury auction stunk two weeks ago," the source said. "People are afraid of the auctions and are shying away from them."

There should be "a bit more action" in the new deal market on Wednesday, but nothing huge, a syndicate source said.

Senior Housing sells split-rated bonds

Senior Housing Properties sold an upsized $200 million of split-rated 6.75% 10-year senior unsecured notes to yield 6.9%, a market source said.

They priced tight to talk in the 7% yield area. The deal size was originally $150 million.

The notes (Ba1/BBB-) priced at a spread of 294 bps over Treasuries.

UBS, Bank of America Merrill Lynch, Jefferies & Co. and Wells Fargo ran the books.

Proceeds are going to fund the redemption of $97.5 million of 7.875% senior notes due April 15, 2015, to repay $58 million under a revolving credit facility and for general corporate purposes.

The REIT for senior living properties is based in Newton, Mass.

Southern Copper plans two-tranche sale

Southern Copper announced a sale of senior unsecured notes (Baa2/BBB-/BBB) in two tranches, a market source said.

The deal is in tranches with maturities in 2020 and 2040.

It is expected to price following a roadshow running from Thursday to Monday.

The bookrunners are Credit Suisse Securities, Goldman, Sachs & Co. and Morgan Stanley & Co. Inc.

Proceeds are being used for general corporate purposes, including financing capital expenditures.

The copper producer has operations in Peru, Chile and Mexico and is based in Phoenix.

Ontario to price 10-year notes

The Province of Ontario is planning to offer 10-year global notes, a source said on Tuesday.

Pricing is expected for Wednesday, with a minimum size of $1 billion. Price talk was in the low 50 bps area over mid-swaps as of early afternoon.

Bank of America Merrill Lynch, Deutsche Bank Securities, J.P. Morgan Securities and UBS were tapped as bookrunners.

The provincial capital is Toronto.

RBC plans five-year note offering

Royal Bank of Canada announced a sale of five-year notes early in the day, a source close to the deal said.

The notes (Aaa/AAA/AAA) are expected to price on Wednesday under Rule 144A, the source said.

Barclays Capital, Goldman Sachs and RBC Capital Markets are the bookrunners.

The financial services provider is based in Montreal and Toronto.

Gulf Power firms

Gulf Power's new $175 million of 4.75% notes due 2020 priced at Treasuries plus 80 bps tightened in secondary trading, according to a source.

The notes were last seen at 74 bps.

"Didn't see a whole lot on them," a trader said.

Financials tighter

Financials did tighten slightly on Tuesday, according to sources.

"It seems like it had a decent bid to it," a trader said near the market close. "I wouldn't say it's moving up a whole bunch, but it definitely had a good tone to it."

For example, New York-based Goldman Sachs' notes due 2020 were "definitely tighter" on Tuesday.

The notes traded between 160 bps and 155 bps, the trader said.

Overall, the financial sector "seemed strong, but I don't think it's flying anymore."

Meanwhile, Charlotte, N.C.-based Bank of America Corp.'s 7.375% notes due 2014 traded 6 bps tighter at 148 bps on Tuesday, according to a source.

Bank, broker CDS levels wider

Elsewhere, the cost of insuring holders of major bank or brokerage house paper against a possible default moved out on Tuesday, according to sources.

Both bank paper credit default swap levels and brokerage-name CDS costs were seen 1 bp wider.

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