Dominion, Union Electric, Prudential, AmEx Credit issue; secondary spreads tighten

By Andrea Heisinger

Omaha, June 12 - Utility and financial names again had a monopoly over the investment-grade market Thursday, with issues pricing from Dominion Resources, Inc., Union Electric Co., Prudential Financial, Inc., American Express Credit Corp. and Toyota Motor Credit Corp.

Things were again stable enough to get issues done, with the window that opened Wednesday staying open.

Spreads were a little wider, a source said, adding that "utility deals are not blowing anyone out of the water, but the real money accounts are going after them."

The secondary market also picked up steam on the influx of new issues that have come into the market over the last couple of days.

"Things are tighter, and I think it's a reflection on the rest of the week," a secondary source said.

"We picked up a few new customers today."

Dominion brings $1.2 billion

Among the day's new issues was Dominion Resources with its $1.2 billion of notes in three tranches.

The size of the issue was increased to add a floating-rate tranche.

That $300 million tranche of two-year notes priced at par to yield three-month Libor plus 105 basis points, which was at the tight end of talk of the Libor plus 110 bps area.

The rest of the issue was fixed-rate notes, with a $500 million tranche of 6.4% 10-year notes pricing at 99.906 to yield 6.413% with a spread of Treasuries plus 220 bps.

The $400 million tranche of 7% 30-year notes priced at 99.232 to yield 7.062% with a spread of Treasuries plus 230 bps.

Both the 10 and 30-year notes priced at the tight end of talk of 220 to 225 bps and 230 to 235 bps respectively.

One source said he was not surprised at the size of the issue, since it was both a utility and got a good price.

Barclays Capital Inc., Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Inc. ran the books.

Union Electric, Prudential price

Union Electric, which is a unit of Ameren Corp., priced $450 million 6.7% senior unsecured notes due 2019 at 99.707 to yield 6.737% with a spread of Treasuries plus 253 bps.

Barclays, BNY Capital Markets and J.P. Morgan Securities Inc. were bookrunners.

Prudential Financial priced $600 million of 60-year hybrid junior subordinated notes that have a fixed rate of 8.875% for 10 years and then a floating rate of three-month Libor plus 500 bps.

They priced at 99.714 with a spread of Treasuries plus 470 bps.

J.P. Morgan, Morgan Stanley & Co., Inc. and Wachovia Capital Markets ran the books.

American Express Credit was another financial name that issued.

It priced $500 million five-year floaters at par to yield one-month Libor plus 170 bps, with J.P. Morgan as bookrunner.

Toyota priced both a fixed and floating-rate issue.

The $250 million 4% two-year notes priced at par via Deutsche Bank Securities Inc., and the $125 million of one-year floaters priced at par to yield one-month Libor plus 1 bp via Barclays.

'Decent market' draws deals

The day's issuers were "taking advantage of a decent market," a source said.

"Brokers and bank are taking a breather," he added.

Although he didn't know how much, he said there's still a backlog out there, much of which will probably wait until next week to come out.

Although issuers have stepped into the market in the last couple of days, there may still be a couple more that try to squeeze something into the market this week.

"There are probably one or two deals for tomorrow, but nothing big," a source said.

New bonds tighten in trading

The secondary market saw most of the day's new issues tighten after pricing.

Dominion Resources 10-year notes were at 216 bps bid, 211 bps offered from pricing at 220 bps, while the 30-year notes were at 227 bps from 230 bps at pricing.

Union Electric's notes also tightened slightly to 250 bps bid, 248 bps offered from 253 pricing.

Wednesday's issue of five-year notes from FPL Group Capital continued to trade up, he said, while Duke Energy Corp.'s five and 10-year notes remained mostly unchanged.

Anheuser weaker

Anheuser-Busch bonds continued to soften up, a source said, after an unsolicited buyout bid.

Late Wednesday InBev NV offered to buy the St. Louis-based brewer for $65.00 per share in cash.

WaMu, Lehman tighter

A trader saw bank CDS 1 to 4 bps tighter, with Washington Mutual seen about 5 bps tighter at 430 bps bid, 450 bps offered.

Brokerage names were unchanged to 25 bps tighter, with Lehman Brothers debt-protection costs about 25 bps tighter at 265 bps bid, 270 bps offered after management changes.

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