Duke Energy, Electricite de France price deals amid bank fears; Duke notes tighten in secondary

By Andrea Heisinger

New York, Jan. 21 - Investment-grade bond issuance picked up slightly Wednesday, with Duke Energy Corp. and Electricite de France SA pricing deals as economic fears continued.

The new bond sales were not nearly as plentiful as in past weeks, and it is unlikely they will pick up before the close of the short week, a source said.

In the secondary market, the Duke Energy bonds were seen tightening shortly after pricing, while the EDF bonds priced late enough in the day so that trading levels were not available.

Duke Energy sells $750 million

Electricity provider Duke Energy priced $750 million of 6.3% five-year bonds Wednesday, a market source said.

The Charlotte, N.C., company's senior notes priced at 99.812 to yield 6.344%, or Treasuries plus 475 basis points.

One source said the size was increased from $500 million, although this could not be confirmed by the bookrunners at press time.

Banc of America Securities LLC, J.P. Morgan Securities Inc. and Morgan Stanley & Co., Inc. ran the books.

EDF prices $5 billion

The largest issue of the day came from Paris-based Electricite de France, and the $5 billion bond sale launched and priced late, a source said.

The $1.25 billion of 5.5% five-year notes priced to yield Treasuries plus 400 bps.

The $2 billion of 6.5% 10-year notes priced to yield Treasuries plus 400 bps.

The $1.75 billion of 6.95% 30-year notes priced at Treasuries plus 387.5 bps.

The notes were sold under Rule 144A and Regulation S.

Full terms were not available at press time because of the lateness of pricing.

Bookrunners were Banc of America Securities, Barclays Capital Inc., BNP Paribas Securities and HSBC Securities.

Toyota unit gives reopening terms

Toyota Motor Credit Corp. announced terms for a $40 million reopening of floating-rate notes due 2009 that priced Tuesday.

The reopened notes priced at 100.009 and have a coupon of three-month Libor plus 80 bps.

Total issuance is $180 million, including $140 million issued Jan. 15.

Agents were Citigroup Global Markets Inc. and Toyota Financial Services Securities USA Corp.

Rest of week unclear

The remaining two days of the week remain up in the air, a market source said late Wednesday.

"We thought it would pick up more today," he said. "Things were still kind of down like yesterday. We didn't see recovery."

Fears about banks and other parts of the economy may have led some companies to think twice about issuing.

The lack of a clear sense of direction on economic recovery from newly sworn-in president Barack Obama also may have added to that unease, the source said.

"It was just a crappy day all around," the source said. He added that it was unlikely the market tone would recover enough Thursday or Friday for there to be a large amount of issuance to close out the week.

"We had a lot last week and were kind of expecting the same this week," he said. "That's probably not going to happen."

He did say the issue from Electricite de France was "a nice surprise, and that it wasn't an issue that had been on the burner.

Duke Energy in nicely

The new Duke Energy 6.3% notes due 2014 were seen tightening about 20 bps soon after pricing, a trader said.

The notes were at 455 bps bid, with no offer, he said, after pricing at Treasuries plus 475 bps.

New Puget Sound inactive

The issue of 6.75% notes due 2016 from Puget Sound Energy Inc. that priced Tuesday was not seen active in the secondary Wednesday, a trader said.

He "didn't see a single market" on the bonds, adding, "My guess, it was put away in a few hands."

Bank, broker CDS mixed

Bank and broker credit default swaps were seen mixed late Wednesday afternoon, a trader said.

Banks were anywhere from 5 bps wider, in the case of Citigroup, to 10 bps tighter, as Wells Fargo was, the trader said.

Broker names were seen "5 [bps] wider across the board," he said.

Wells Fargo, B of A top trading

Issues of notes from Wells Fargo & Co. and Bank of America Corp. were seen at the top of high-grade trading early Wednesday afternoon.

An issue of 3% notes due 2011 from Wells Fargo was seen as the top trader.

The 5.65% notes due 2018 from Bank of America were seen in the second highest spot.

Wells Fargo recently acquired Wachovia Corp, while Bank of America has received government funding to help absorb its acquisition of Merrill Lynch & Co.

Wells Fargo may be the next to seek government rescue funds, analysts said Wednesday.

Daimler, HSBC big movers

Daimler North America was seen as one of the day's biggest movers, as Chrysler signed an alliance with car maker Fiat.

The car company's 5.875% bonds due 2011 were seen more than 80 bps tighter late Wednesday.

Tightening almost as much was HSBC Bank USA. Its 4.625% bond due 2014 was seen tightening about 80 bps.

Moving in the other direction was an issue from related HSBC Finance, whose 5.9% notes due 2012 were seen nearly 70 bps wider.

HSBC was one of the bank names pulling the Dow down in the past two days.

Merrill Lynch's 6.4% notes due 2017 were seen out about 65 bps.

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