SoCal Edison upsized deal, Gulf Power price as issuance drops; CVS Caremark, IBM trade wider

By Andrea Heisinger and Cristal Cody

New York, May 12 - Southern California Edison Co. sold mortgage bonds on Thursday as volume subsided following a busy first half of the week.

The electric utility sold an upsized $500 million of 10-year mortgage bonds. The size was increased from $400 million, and the bonds priced at the low end of the guidance range.

There was also a $25-par sale from Gulf Power Co., a Southern Company. The utility upsized the deal to $125 million from $100 million of 40-year senior notes.

European Investment Bank gave terms for its $3 billion sale of five-year notes priced earlier in the week.

There wasn't much change in the market for the day, but that didn't have much impact on issuance.

"I think everyone's just waiting for next week," said one market source. "I wouldn't say anything was different today."

The top half of the coming week is expected to be busy, but a possible issuance amount has not been determined yet.

Overall investment-grade Trace volume was flat at $12.3 billion, a market source said.

Bonds traded a "couple basis points weaker generally," a trader said. "This morning, there was a little bit of activity and then it died out post-lunch."

The Markit CDX Series 14 North American investment-grade index firmed 1 basis point to a spread of 88 bps, according to Markit Group Ltd.

In the secondary market, EIB's notes traded tighter and CVS Caremark Corp.'s 10-years widened further, a trader said.

International Business Machines Corp.'s new three-year notes widened 1 bp on the bid side, according to a trader.

Financials traded flat to slightly better on the move in Treasuries, a trader said.

Treasuries fell, erasing the previous day's gains on the long end as stocks rallied and the government's auction of 30-year bonds yielded tepid demand. The benchmark 10-year note yield rose 7 bps to 3.22% and the 30-year bond yield rose 5 bps to 4.35%.

So. Cal. Edison's 10-years

Southern California Edison sold an upsized $500 million of 3.875% 10-year first and refunding mortgage bonds, series 2011A, (A1/A/A+) to yield Treasuries plus 75 bps, said a market source away from the trade.

The bonds were priced at the low end of talk in the range of 75 bps to 80 bps, a source said. The size was increased from $400 million.

Blaylock Robert Van LLC, Credit Suisse Securities (USA) LLC and RBS Securities Inc. were active bookrunners.

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

The electric utility is based in Rosemead, Calif.

Gulf Power sells $25 bonds

Gulf Power priced a $125 million offering of $25-par series 2011A 5.75% senior notes, according to an FWP filed with the Securities and Exchange Commission on Thursday.

Price talk for the notes (A3/A/A) was originally around 5.875%, but a market source said it was later revised to 5.75%.

Additionally, the deal was upsized from $100 million

Morgan Stanley & Co. Inc., Citigroup Global Markets Inc., UBS Securities LLC and Wells Fargo Securities LLC are the bookrunners.

Proceeds will be used to repay some or all of the company's $110 million variable-rate term loan, to repay a portion of its outstanding short-term indebtedness and for general corporate purposes, including the company's continuous construction program.

The Pensacola, Fla.-based company has applied to list the bonds on the New York Stock Exchange.

EIB gives terms

The European Investment Bank gave terms for its $3 billion of 2.125% five-year notes (Aaa/AAA/AAA) priced to yield 28 bps over Treasuries, according to an FWP filing with the SEC.

The notes were priced on Tuesday.

Bookrunners were Bank of America Merrill Lynch, Barclays Capital Inc. and J.P. Morgan Securities LLC.

Proceeds will be used for the general operation of EIB, including disbursement of loans granted to EIB.

EIB's notes traded tighter in the secondary market, a source said.

"This morning, it was 3 basis points tighter," the trader said.

The funding arm of the European Union is based in Kirchberg, Luxembourg.

CVS wider

CVS Caremark's 10-year senior notes sold on Monday continued to stay weak in the secondary market, while the retailer's long bonds held at the issue price, a trader said Thursday.

The company sold $550 million of 4.125% notes due 2021 at a spread of Treasuries plus 115 bps. The notes traded on Thursday at 124 bps bid, 122 bps offered.

The second tranche of $950 million of 5.75% bonds due 2041 priced at a spread of 155 bps over Treasuries. In trading, the notes held at 155 bps bid, 153 bps offered.

The pharmacy retailer is based in Scarsdale, N.Y.

IBM weaker on bid side

IBM's new 1.25% three-year notes traded on Thursday at 38 bps bid, 35 bps offered, a trader said.

On Monday, the company sold $1 billion of the notes (Aa3/A+/A+) at a spread of Treasuries plus 37 bps.

The technology and computer company is based in Armonk, N.Y.

Stephanie Rotondo contributed to this review

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