Below is excerpted from the September 28, 2020, edition of Quigley’s Corner, Mischler Financial Group’s daily debt market coverage and commentary distributed to Fortune 500 treasury teams, leading institutional investors, and the sell-side’s most recognized fixed income syndicate desks.
Investment Grade New Issues – IG DCM Adds $5.90b; Mischler is Active Co-Manager on Entergy Texas, Inc. & Southern California Edison
Market tone opened up firm this morning following a start and stop week last week that saw two shut-outs, two very active days, and one day that hosted one issue. Today the IG Corporate dollar DCM hosted 7 issuers across 9 tranches totaling $5.90b. The SSA space was inactive.
It’s a late night after a long day….but a great day for our nation’s oldest SDVBE. We’ll review the days critical talking points and then it’s on to Entergy Texas and SoCal Edison.
- Entergy Texas, Inc. upsized today’s long 10-year FMB transaction to $600mm from $500mm at the launch and at the tightest side of guidance.
- The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 8 IG Corporate-only new issues that displayed price evolution was <28.59> bps.
- ICE BAML’s IG Index widened 3 bps to +146 vs. +143. (It’s post-Crisis low is +90 set on 2/01).
- Bloomberg/Barclays US IG Corporate Bond Index OAS widened 4 bps to +140 vs. +136. (3.73 represents the high on 3/23/2020; 0.85 is the post-Crisis low set on 2/01/2018).
- Standard & Poor’s Investment Grade Composite Spread widened 2 bps to +180 vs. +178. (+125 represents its post-Crisis low set 2/02).
- Investment-grade corporate bond trading posted a final Trace count of $16.7b on Friday versus $21.8b on Thursday and $15.3b the previous Friday.
- The 10-DMA stands at $18.8b.
- For the week ended September 23rd, Refinitiv Lipper U.S. Fund Flows reported weekly IG inflows of $4.162b into Corporate Investment Grade Funds (2020 net inflow of $85.784b) and outflows of $4.217b into High Yield Funds (2020 net inflow of $34.784b).
- Entergy Texas, Inc. $600mm 10-year First Mortgage Bond New Issuance
Entergy Texas, Inc. is a public utility company engaged in the generation, transmission, distribution and sale of electric energy to approximately 454,000 customers across 27 counties in an area covering 15,320 square miles in the State of Texas. The Company will use the net proceeds we receive from the issuance and sale of the bonds (i) to repay some or all of our outstanding (a) $135,000,000 aggregate principal amount of First Mortgage Bonds, 5.625% Series due June 1, 2064 prior to maturity and (b) $125,000,000 aggregate principal amount of First Mortgage Bonds, 2.55% Series due June 1, 2021 at or prior to maturity, and (ii) for general corporate purposes. Pending the application of the net proceeds of the bonds, we will invest them in short-term, highly liquid, high-rated money market instruments and/or the Entergy System money pool.
Entergy Texas Inc. Deal Dashboard
………here’s a snap shot of today’s final Entergy Texas, Inc’s. order book size and oversubscription rate throughout the book build – the measure of investor demand:
| ETR New Issue |
Tranche Size | Final Book | Bid-to-Cover Rate |
| Long 10yr FMBs | $600mm | $1,500mm | 2.50x |
……and here’s a check of spread compression from IPTs thru the launch and final pricing, NIC and where the paper is currently trading.
| ETR New Issue |
Ratings | IPTs | GUIDANCE | LAUNCH | PRICED | SPREAD COMPRESSION |
NIC (bps) |
TRADING at the BREAK |
+/- (bps) |
| Long 10yr FMBs | Baa1/A | +137.5a | +115a (+/-2.5) | +112.5 | +112.5 | <25> | <2.5> | 114/ | +1.5 |
Entergy Texas, Inc. $600mm long 10-year FMBs Final Pricing Details:
$600m 1.75% FMBs due 3/15/2031 @$99.360 to yield 1.789% or T+112.5 MWC+20
Entergy – Defining the “S” for “Social” in ESG (Environmental, Social & Governance)
It’s always reassuring reading stories about corporations that stand out as models for social governance done right, especially today. Please take a couple of minutes to learn what a wonderful example Entergy Corp. and Entergy Texas are for ESG in Corporate America.
In terms of social governance Entergy Corporation’s Executive Team, for example, is comprised of 14 industry leaders including 3 women and 3 African-Americans. It is a very well-rounded demographic at a Company that promotes from within and is an example of how corporate leadership works in its own right. There is a lot of news out there on Main Street, U.S.A. today focused on the fact that despite changing demographics, fewer than 5% of board seats are held by women and men of color. Entergy’s Board is comprised of 5% women and 21.50% African-Americans. So, does diversity have to be driven by government fiat? Entergy is a great example of one company in Corporate America getting everything right …….on its own. That’s something I am happy to extoll the virtues of. When one does the right thing, naturally, I will always do my part to make sure this great story gets out there.
Southern California Edison Co. $350mm long 10-year First & Refunding Mortgage Bond New Issue
Southern California Edison Co. is the largest subsidiary of Edison International and the primary electricity supply company for most of Southern California providing 14 million people with electricity across a 50,000 square mile service territory..The Company will use the net proceeds it receives from today’s issuance to fund the payment of wildfire claims above the amount of expected insurance proceeds, including payments under a September 22., 2020- settlement agreement in connection with the Thomas Fire, Koenigstein Fire and Montecito Mudslides.
Southern California Edison Co. Deal Dashboard
………here’s a snap shot of today’s final Entergy Texas, Inc’s. order book size and oversubscription rate throughout the book build – the measure of investor demand:
| EIX New Issue |
Tranche Size | Final Book | Bid-to-Cover Rate |
| Long 5yr FMBs | $350mm | $905mm | 2.59x |
- ……and here’s a check of spread compression from IPTs thru the launch and final pricing, NIC and where the paper is currently trading.
| EIX New Issue |
Ratings | IPTs | GUIDANCE | LAUNCH | PRICED | SPREAD COMPRESSION |
NIC (bps) |
TRADING at the BREAK |
+/- (bps) |
| Long 5yr FMBs | A3/BBB+ | +120a | +100a (+/-3) | +97 | +97 | <23> | 2 bps | 97/ | 0/flat |
Southern California Edison Co. $350mm long 5-year FMBs Final Pricing Details:
$350m 1.20% FMBs due 2/01/2026 @$99.810 to yield 1.237% or T+97 MWC+215
We thank Team SCE for the enduring value-added professional relationship I/we have enjoyed over the years. But SCE’s commitment to D&I does not end with its financial services partnership. Internally SCE has a history of supporting military veterans by proudly employing over 6% of military veterans company-wide who translate their military skills within the workplace. Over 7% of veterans are represented at the executive level who leverage their military leadership and technical skills earned through the various ranks and different branches of military service. SCE is a military-friendly company that encourages veterans to apply for jobs at Edison where they can translate their experience, succeed and advance. Because SoCal Ed values the leadership skills and the steadfast sense of purpose the military instills in those who served. Through incentives such as providing employees with 30 consecutive calendar days of leave during their military training or active duty, the Company works with veterans to foster a sense of place in the workplace. Full and part-time employees receive the difference between base pay and military pay for up to two weeks on training and up to 24 months for full-time employees while assisting in the liaison efforts between SCE and the military communities it serves. SCE also offers veterans a 25% discount on electric service for full-time SCE employees who live in its service territory and have been Company employees for six months.
Above is the opening extract from Quigley’s Corner aka “QC” 09-28-20 edition distributed via email to institutional investment managers, lead underwriter syndicate desks and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest diversity-certified broker-dealer owned and operated by Service-Disabled Veterans.
The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of Mischler’s primary debt capital markets desk. Commentary includes a comprehensive “deep dive” with optics on the day’s investment-grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment-grade credit spreads, new issue activity, secondary market most active issues, and upcoming deal pipeline. To receive Quigley’s Corner, please email: rquigley@mischlerfinancial.com or via phone 203.276.6646
