Time Warner, Puget, Southwestern, Deere among sales; spreads firm; financials still in favor

By Andrea Heisinger and Cristal Cody

New York, March 3 - Time Warner, Inc., Puget Sound Energy, Inc., Southwestern Electric Power Co., Western Massachusetts Electric Co. and John Deere Capital Corp. were among the issuers on a busy Wednesday in the high-grade market.

Issuers saw a window open after sitting on the sidelines and didn't want to miss out, a source said.

Entertainment and internet giant Time Warner priced its $2 billion deal late in the afternoon, and brought it tight to initial whispered guidance. It was made up of $1.4 billion in 10-year notes and $600 million of 30-year debentures, and was about three times oversubscribed.

Puget Sound Energy offered $325 million of 30-year bonds early in the day.

It was followed by John Deere Capital, which priced $500 million of five-year notes.

Another utility, Southwester Electric, priced its $350 million sale of 30-year notes quickly.

A small $95 million issue of 10-year notes was done by Western Massachusetts Electric.

There "could be" more bonds priced on Thursday, but likely nothing exciting, sources said.

An issue of three-year notes from the Bank of England is still expected to price this week, although timing is unsure after the sale did not get done on Wednesday.

While utilities ruled the day for new deals hitting the secondary market, the financial sector continues to attract investors, one source told Prospect News on Wednesday.

"Generally speaking, it seems like financials are still the bonds of choice for the pick-up over industrials."

For example, Bank of America Corp.'s outstanding 6.5% notes due 2016 tightened 6 bps to 148 bps over Treasuries, a source said.

Meanwhile on Wednesday, overall Trace volume dipped less than 2% to about $15.8 billion, according to one source.

The CDX Series 13 North American high-grade index tightened 1 bp to a mid bid-asked spread level of 89 bps, a source said.

Also on Wednesday, Treasuries eased slightly. The yield on the 10-year Treasury note weakened 1 bp to 3.62%, and the yield on the 30-year Treasury bond eased 1 bp to 4.58%, according to a market source.

New offerings from John Deere Capital, Southwestern Electric Power and Time Warner all firmed in trading, according to sources.

Bids for Puget Sound Energy's new 5.795% bonds due 2040 was seen widening out, while the bids for Western Massachusetts Electric's new 5.1% notes firmed on the day, sources said.

Time Warner sells $2 billion

Time Warner, Inc. sold $2 billion of senior unsecured notes (Baa2/BBB/BBB) in two tranches late in the day, a source close to the sale said.

A $1.4 billion tranche of 4.875% 10-year notes priced at a spread of 130 bps over Treasuries. The tranche came in at the tight end of unofficial guidance that was in the 135 bps area, a source away from the deal said.

The $600 million tranche of 6.2% 30-year debentures sold at Treasuries plus 162 bps. These notes also priced tight to unofficial talk in the 165 bps area, but not as tightly as the 10-year notes.

There was no official price guidance for the notes, the source who worked on the deal said, adding that the bookrunners went off outstanding News Corp. bonds.

Demand was strong for the offering, with books about three times oversubscribed overall, a source close to the sale said. There was slightly more interest in the 10-year notes.

The deal is guaranteed by Historic TW, Inc., with that guaranteed by HBO and TBS.

Timing of the deal was likely due to a tender announcement by the company, a source said.

"The market was just receptive today," he said.

Bank of America Merrill Lynch, Citigroup Global Markets, Deutsche Bank Securities and Morgan Stanley & Co. were bookrunners.

Proceeds are being used to repay, repurchase and redeem debt and for general corporate purposes.

The entertainment company is based in New York City.

Issuers take advantage of primary tone

A string of days with decent market tone led to several companies - heavy on the utilities - issuing bonds in the middle of the week.

Those who worked on theses offerings did not have a solid explanation for why there were so many deals overall, but said it was likely a solid showing of sales earlier in the week that prompted the inflow.

"A lot of them have been waiting on the sidelines," a syndicate source said. "Everyone had their [documents] ready."

There has been "good tone all week," another source said, adding that there is little new issue concession on the deals.

Also, "everything's been oversubscribed," he said.

The number of utilities coming into the market was likely just a coincidence. Some have been waiting to issue, and when the window opened for one, it opened for them all.

"I think they saw that one jumped in, and they all jumped in," a source said.

Still, at least one deal that was supposed to price this week has been pushed back to the coming week, for unspecified reasons, a syndicate source said.

Continued steps to help Greece have also helped the market tone and instilled more confidence in potential issuers and investors.

"People were feeling better about that," a market source said of the situation in Greece. "I think that was maybe why we were busy."

Puget Sound prices 30-years

Puget Sound Energy priced $325 million of 5.795% 30-year bonds (Baa1/A-) to yield 120 bps over Treasuries, a source close to the sale said.

There was no official price talk for the sale, he said.

Bookrunners were Barclays Capital, KeyBanc Capital Markets, Scotia Capital and Wells Fargo Securities.

The electric and natural gas company is based in Bellevue, Wash.

John Deere offers $500 million

Nevada-based John Deere Capital sold $500 million of 2.95% five-year senior unsecured notes (A2/A) by early afternoon to yield 68 bps over Treasuries, a source close to the sale said.

Bank of America Merrill Lynch, Credit Suisse Securities and HSBC Securities were bookrunners.

The financing arm for Deere & Co. products is based in Reno, Nev.

Southwestern Electric sells senior notes

Southwestern Electric Power sold $350 million of 6.2% 30-year senior unsecured bonds (Baa3/BBB/BBB+) to yield 160 bps over Treasuries, a source said.

BNP Paribas Securities, J.P. Morgan Securities and Morgan Stanley & Co. ran the books.

Proceeds will be used for general corporate purposes.

The utility subsidiary of American Electric Power Co. is based in Shreveport, La.

Western Massachusetts prices $95 million

Western Massachusetts Electric sold $95 million of 5.1% 10-year senior unsecured notes (Baa2/BBB/BBB+) at 150 bps over Treasuries, according to an FWP filing with the Securities and Exchange Commission.

Bank of New York Mellon Securities and Citigroup Global Markets were bookrunners.

Proceeds are going to refinance short-term debt and for general working capital purposes.

The utility subsidiary of Northeast Utilities Service Co. is based in Springfield, Mass.

John Deere tighter

John Deere Capital's $500 million of 2.95% notes due 2015, which priced at Treasuries plus 68 bps, tightening in secondary trading, according to sources.

The notes were seen late Tuesday at 65 bps by one trader.

"None offered," one trader said.

But later in the day, the five-year notes were quoted at 65 bps bid, 62 bps offered.

Near the market close, the notes continued tightening to 62 bps over Treasuries, according to a trader.

"Before that," the notes were seen at 64 bps bid, 62 bps offered, the trader said.

Puget Sound bids wider

Meanwhile, Puget Sound Energy's $325 million of 5.795% bonds due 2040 that priced at Treasuries plus 120 bps on Wednesday were moved out on the bid side, according to sources.

The 30-year bonds were seen at 122 bps bid, 120 bps offered, one source said.

Late in the day, the notes were last quoted at 123 bps bid, 120 bps offered, a trader said.

Western Massachusetts bid tighter

Meanwhile bids firmed for Western Massachusetts Electric's new 5.1% notes due 2020, priced earlier at Treasuries plus 150 bps.

The notes were seen at 150 bps bid, 143 bps offered, according to a trader.

Time Warner gains in secondary

Time Warner sold $2 billion of bonds in two tranches on Wednesday and the new debt was seen tightening in the secondary.

The notes due 2020 priced at Treasuries plus 130 bps.

"Last I saw," the 10-year notes were tighter at 127 bps bid, 123 bps offered, a source said. "Saw the 10-years offered right before pricing at +125 and +123."

Time Warner also sold $600 million of notes due 2040 at Treasuries plus 162 bps. Those notes tightened to 157 bps bid, 154 bps offered, the source said.

Southwestern Electric firmer

Also on Wednesday, Southwestern Electric Power, an American Electric Power unit, priced $350 million of 6.2% senior bonds due 2040 at Treasuries plus 160 bps.

The bonds were tighter in afternoon trading at 159 bps bid, 156 bps offered, a source said.

Maintaining their grip on firming, the bonds tightened to 156 bps bid, 155 bps offered and were last seen at 154 bps, a trader said.

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