Utility issuers tap primary; Harley-Davidson, National Australia Bank price; GE, PG&E mixed

By Cristal Cody

Tupelo, Miss., Nov. 26 – Electric utility issuers kicked the post-Thanksgiving holiday week off with two high-grade bond deals on Monday, while the session overall saw nearly $4 billion of supply.

Virginia Electric and Power Co. sold $600 million of 30-year senior notes, pricing the issue more than 10 basis points tighter than initial talk in the Treasuries plus 145 bps area, a source said.

Tucson Electric Power Co. priced 30-year senior notes in a $300 million offering, bringing its deal about 5 bps tighter than talk, a source said.

In other issuance, Harley-Davidson Financial Services, Inc. brought an upsized $450 million of three-year senior medium-term floating-rate notes to the market.

National Australia Bank Ltd., New York Branch also sold $1.35 billion of senior notes in two tranches, while parent National Australia Bank Ltd. placed $1.15 billion of five-year mortgage covered bonds.

A backlog of high-grade deals pulled in the last few weeks due to market volatility remains on tap, according to market sources.

About $10 billion to $20 billion of average deal volume is forecast for the week but could be higher depending on market tone, syndicate sources said.

High-grade corporate issuers priced $6 billion of bonds last week, in line with syndicate forecasts of about $5 billion to $10 billion of investment-grade issuance.

The bond markets were closed on Thursday and closed early on Friday due to the holiday.

For the week ended Nov. 21, Lipper US Fund Flows reported inflows of $287 million for corporate investment-grade funds, down from inflows of $755 million in the prior week.

The Markit CDX North American Investment Grade 31 index ended the day about 1 bp tighter at a spread of 79 bps.

New issues have traded mostly weaker in the secondary market, while credit spreads have softened in the past few weeks as bonds have sold off.

Specific names in the energy sector have softened in November, including General Electric Co.’s bonds, which widened after an unexpected sell-off, according to market sources.

General Electric’s 5% series D fixed-to-floating-rate noncumulative perpetual preferred stock is “trading in the mid- to low-70 cents on the dollar and its senior debt trades 300 [bps] over Treasuries due to the recent volatility around its dividend cut and credit downgrade as quarterly losses mount at the company,” according to a Piper Jaffray & Co. research note on Monday.

General Electric Capital Corp.’s 3.45% notes due May 15, 2024 were quoted at 290 bps bid on Monday, better than where the notes went out on Wednesday ahead of the holiday at 370 bps bid, a market source said.

The Norwalk, Conn.-based funding arm sold the notes in a $1 billion offering on May 12, 2014 at 99.581 to yield 3.51% and a Treasuries plus 85 bps spread.

Pacific Gas & Electric Co.’s senior notes also remain weak after the company’s power lines were linked to the Camp Fire in California and its bonds downgraded earlier in November. The utility’s notes were mostly flat to softer on Monday.

“PCG stock fell by half and the company fully drew $3.3 [billion] in credit facilities in response to its potential culpability in the wildfires,” the Piper Jaffray note said.

Virginia Electric prices

Virginia Electric and Power sold $600 million of 4.6% 30-year senior notes (A2/BBB+/A) at a spread of 132 bps over Treasuries on Monday, according to an FWP filing with the Securities and Exchange Commission.

The notes priced at 99.435 to yield 4.635%.

Deutsche Bank Securities Inc., SunTrust Robinson Humphrey Inc. and Wells Fargo Securities LLC were the bookrunners.

The electric utility is based in Richmond, Va.

Harley-Davidson upsizes

Harley-Davidson Financial Services priced $450 million of senior medium-term floating-rate notes due March 2, 2021 (A3/BBB+/A) on Monday at Libor plus 94 bps, according to a market source.

The deal was upsized from $350 million.

The notes were initially talked to price in the Libor plus 120 bps area.

Citigroup Global Markets Inc., Lloyds Securities Inc. and Mizuho Securities USA LLC were the bookrunners.

The Chicago-based company is the financing arm of Harley-Davidson Inc.

Tucson Electric sells notes

Tucson Electric Power sold $300 million of 4.85% 30-year senior notes (A3/A-/) at 99.623 to yield 4.874%, or a spread of 155 bps over Treasuries on Monday, according to an FWP filing with the SEC.

MUFG, Scotia Capital (USA) Inc. and U.S. Bancorp Investments, Inc. were the bookrunners.

The electric utility is based in Tucson, Ariz.

National Australia prints

National Australia Bank, New York Branch sold $1.35 billion of senior notes (Aa3/AA-/) in two tranches on Monday, according to a market source.

A $600 million three-year floating-rate tranche priced at Libor plus 71 bps.

The New York City-based bank sold $750 million of 3.7% notes due Nov. 4, 2021 at a Treasuries plus 88 bps spread.

Parent company National Australia Bank sold $1.15 billion of 3.45% five-year mortgage covered bonds (Aaa//AAA) on Monday at mid-swaps plus 45 bps, a market source said.

The notes priced with a spread of 59.3 bps over over Treasuries.

Initial price talk on the issue was in the mid-swaps plus 47 bps area.

HSBC Securities (USA) Inc., National Australia Bank, RBC Capital Markets, LLC and TD Securities (USA) LLC were the lead managers on both deals.

The bank is based in Melbourne.

PG&E mixed

Pacific Gas & Electric’s 4.25% notes due Aug. 6, 2023 were quoted mostly unchanged in secondary trading on Monday at 92 bid, a market source said.

The company (Baa2/BBB-/BBB-) sold $500 million of the five-year notes on Aug. 2 at 99.76 to yield 4.3% and a spread of 145 bps over Treasuries.

Pacific Gas & Electric’s 4.65% notes due Aug. 6, 2028 declined about 2 points to 89 bid.

The 10-year notes priced in a $300 million issue in the August offering at 99.72 to yield 4.69% and a Treasuries plus 170 bps spread.

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

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