Prudential Financial, P&G, Pacific Gas, Delta sell; tone stays weak; Sprint paper widens

By Andrea Heisinger and Cristal Cody

New York, Nov. 15 - Prudential Financial, Inc., Procter & Gamble Co., Southern California Gas Co., Delta Air Lines, Inc. and Pacific Gas & Electric Co. offered bonds on Monday amid renewed fears of euro debt.

Cincinnati-based Procter & Gamble sold $1.5 billion in tranches with fixed- and floating-rate tranches. The floating-rate notes were added before the launch and both notes priced in line with guidance.

Prudential Financial had the second largest deal of the day, totaling $1 billion in two tranches. Both the 10-year and 30-year notes were priced at the tight end of guidance.

Southern California Gas sold its $300 million of 30-year first mortgage bonds without increasing the size. A source who worked on the bonds said the issuer had a "do not grow" provision on it, and the size was announced when the deal was.

Delta Air Lines priced $474.072 million of pass-through trust certificates. The certificates have a final expected distribution in 2019, with legal distribution in 2020.

The certificates are secured by several aircraft.

Pacific Gas & Electric was a late addition to the day's roster of deals. The utility reopened a 10-year note and 30-year bond to add a total of $500 million.

An upcoming sale was announced by Telephone & Data Systems, Inc. The telecommunications company is selling $200 million of notes due 2059 on Tuesday, a source said.

Secondary trading "opened with a weaker tone" and was "pretty volatile" throughout the day, a source said.

Overall investment-grade Trace volume rose 25% to about $10.5 billion on Monday, a market source said.

Sprint Nextel Corp.'s bonds due 2032 continued to weaken after Moody's Investors Service said it may downgrade the company's rating. The company's bonds due 2032 have eased 9 bps in the past two weeks, a trader said.

The Markit CDX Series 14 North American investment-grade index firmed 1 point on Monday to a 93 bps spread, according to Markit Group Ltd.

Treasury volatility played a part in affecting corporate bonds, sources said.

"The curve shape was changing a bit," a trader said. "On the 2040s, we're starting to see a few bonds come in at lower levels based on the Treasury move. Some of the 10-year paper is a basis point or two better."

Yields climbed higher on Monday on maturities of five years and longer on continued sell-offs as the Federal Reserve kicked off the second purchase of its quantitative easing program to boost the economy, a point of contention among some market participants.

The yield on the benchmark 10-year Treasury note soared to 2.95% from 2.77%. The yield on the 30-year bond jumped to 4.41% from 4.29%.

The Federal Reserve said it will buy back $600 billion of Treasuries and started the first round with the purchase of $7.229 billion of short-dated government debt on Friday.

On Monday, the Fed bought another $7.923 billion of Treasuries due 2016 though 2017 and plans to buy a total of $105 billion of bonds over the next month.

Traders continued the sell-off on the long end of the curve on Monday, according to a source.

"Long Treasuries have been going down," the source said. "People were front-running the Fed - they didn't deliver on what was expected."

P&G offers $1.5 billion

Consumer products company Procter & Gamble offered $1.5 billion of senior notes (Aa3/AA-) in two tranches later in the day, an informed source said.

The floating-rate tranche of notes was added to the sale before the launch, the source said.

A $500 million tranche of two-year floating-rate notes priced at par to yield Libor plus 4 bps. This was at the tight end of guidance in the Libor plus 5 bps area.

The other tranche was $1 billion of 1.8% five-year notes priced at a spread of Treasuries plus 47 bps. The notes priced in line with guidance in the 47 bps area.

Goldman Sachs & Co., J.P. Morgan Securities LLC and Morgan Stanley & Co. Inc. were bookrunners.

Proceeds will be used for general corporate purposes.

The consumer products company is based in Cincinnati.

Prudential sells two tranches

Prudential Financial offered $1 billion of notes (Baa2/A) split evenly between two tranches, a source who worked on the trade said.

The $500 million of 4.5% 10-year notes priced at a spread of Treasuries plus 167 bps. The notes sold at the tight end of guidance in the 170 bps area.

A second tranche was $500 million of 6.2% 30-year bonds sold at 185 bps over Treasuries. This tranche also priced at the tight end of whispered guidance of 190 bps and revised talk in the 187.5 bps area.

The deal was several times oversubscribed, the source said. The 10-year notes were about four times oversubscribed, and the 30-year bonds were about five times over.

"The deal went really well," he said.

Citigroup Global Markets Inc., HSBC Securities USA Inc. and Wells Fargo Securities LLC were bookrunners.

The financial and insurance product provider is based in Newark, N.J.

Weak tone remains

The pace of bond deals slowed considerably from a week earlier, maybe owing to the downturn of the tone in the high-grade bond market, sources said at the end of the day.

One source said that he "got slammed at the end of the day" and added that this was welcome "going into the end of the year."

This was more enthusiasm than a syndicate source could muster about the market. The tone had faltered at the end of the previous week as fears grew of Ireland requiring a bailout by the European Union.

"It was a little better [today]," the syndicate source said. "It was not better in equities, and there was a yield sell-off. There wasn't much of a change to report. It's still a soft tone."

Things may have been slightly better tone-wise in the high-grade market overall, a source said, but it's "not getting better for issuers." That may have been why the calendar was a little light for the day, he said.

Tuesday and Wednesday are expected to have sales, but except for the Telephone & Data Systems bonds, no others have officially been announced.

Southern Calif. Gas' 30-year

Los Angeles-based Southern California Gas priced $300 million of 5.125% 30-year first mortgage bonds, series MM, (Aa3/A+/AA-) by mid-afternoon to yield Treasuries plus 85 bps, a source away from the sale said.

Goldman Sachs & Co., Mitsubishi UFJ Securities USA Inc., Ramirez & Co. Inc., RBS Securities Inc. and Williams Capital Group LP were bookrunners.

Proceeds will be put in a general treasury fund and used to repay $250 million of first mortgage bonds maturing in January 2011 and to replenish amounts expended and to be expended for expansion and improvement of a utility plant.

The issuer is a natural gas utility.

Delta prices pass-throughs

Delta Air Lines sold $474.072 million of 4.95% pass-through trust certificates, series 2010-2A, due 2020 at par to yield 4.95%, a source close to the sale said.

The spread on the certificates (Baa2/A-) was Treasuries plus 346.4 bps.

The certificates have a final expected distribution date of May 23, 2019 and a final legal distribution on May 23, 2020. They have an initial average life of 5.6 years.

Active bookrunners were Credit Suisse Securities USA LLC and Morgan Stanley & Co. Inc.

The certificates are secured by aircraft delivered to Delta between 2000 and 2010. Proceeds are being used to acquire equipment notes.

The commercial airline is based in Atlanta.

PG&E reopens two issues

Pacific Gas & Electric reopened two tranches of senior notes (A3/BBB+/A) late in the afternoon to add $500 million, an informed source said.

The company reopened its 3.5% notes due Oct. 2020 to add $250 million. The notes priced at a spread of Treasuries plus 90 bps.

A 5.4% bond due Jan. 2040 was also reopened to add $250 million. These notes priced at Treasuries plus 118 bps.

The total outstanding amount on the 10-year notes is now $800 million, including $550 million priced on Sept. 8 at 90 bps over Treasuries. The total on the 30-year bonds is also $800 million, including $550 million sold on Nov. 10, 2009 at 110 bps over Treasuries.

Bookrunners for the reopened notes were Bank of America Merrill Lynch, RBS Securities Inc., UBS Securities LLC and Wells Fargo Securities LLC.

Proceeds are going to repay outstanding commercial paper totaling $435.7 million.

The electric and natural gas utility is based in San Francisco.

Telephone & Data plans deal

Telephone & Data Systems is planning a $200 million sale of senior notes due 2059, according to a market source and a 424B5 filing with the Securities and Exchange Commission.

The notes (Baa2/BBB-/BBB) will be priced at $25 each and are callable on or after 2015.

Bookrunners are Bank of America Merrill Lynch, Citigroup Global Markets Inc., UBS Securities and Wells Fargo Securities LLC.

Proceeds are going to redeem some or all of its $500 million of 7.6% notes due 2041.

The telecommunications services company is based in Chicago.

Sprint paper widens 9 bps

Sprint Nextel's bonds widened on Monday after Moody's Investors Service said it may downgrade the company's current rating of Ba2, sources said.

"Sprint paper continued to drop on the back of Moody's essentially saying they downgraded them," a trader said. "Sprint paper's down another point and a half today."

The 8.75% bonds due 2032 closed the day out at 101.5, 102.5.

"That's down 9 points since the whole news came out over the last week and a half," the trader said.

Moody's said Sprint faces subscriber losses and risk because of its deteriorating relationship with communications company Clearwire.

On Nov. 9, Overland Park, Kansas-based Sprint's debt started weakening in the secondary market after the company announced substantial doubt over Clearwire's ability to continue operating. Sprint owns a 54% stake in the wireless communications company.

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