Atlantic City Electric brings mortgage bonds; Dollar General, Family Dollar come in

By Aleesia Forni and Cristal Cody

Virginia Beach, Aug. 18 – Atlantic City Electric Co. came to Monday’s primary market with a $150 million offering of first mortgage bonds.

As was expected, primary activity was mostly quiet as the market heads into the late-summer slowdown.

The day’s sole new deal sold at the tight end of talk, which was set in the low-100 basis points area over Treasuries.

A source noted that the deal’s orderbook was around two times oversubscribed.

Activity is expected to remain slow as the week moves on, as the market focuses on the Federal Open Market Committee minutes and the economic symposium in Jackson Hole, Wyo.

Investment-grade bonds traded mostly better, and spreads tightened over the session, market sources said.

The Markit CDX North American Investment Grade series 22 index firmed 3 bps to a spread of 57 bps.

Dollar General Corp.’s 3.25% senior notes due 2023 were quoted nearly 100 bps tighter from the start of the month after the company launched a bidding war on Monday for Family Dollar Stores, Inc., according to a trader.

Dollar General offered to buy the rival discount retailer for $78.50 a share in cash for a deal valued at $9.7 billion.

Dollar Tree Inc. announced in late July that it would acquire Family Dollar for $8.5 billion in cash and stock.

Family Dollar Stores’ 5% senior notes due 2021 saw little activity over the day but have tightened about 60 bps from where the paper traded in early August, a trader said.

“Very little trades,” the trader said.

Atlantic City Electric prices

Monday’s primary saw Atlantic City Electric sell a $150 million issue of 3.375% first mortgage bonds (A3/A/A-) due Sept. 1, 2024 with a spread of Treasuries plus 100 bps, according to a market source and an FWP filed with the Securities and Exchange Commission.

Pricing was at 99.957 to yield 3.38%.

Barclays, BNY Mellon Capital Markets LLC, KeyBanc Capital Markets and Credit Suisse Securities (USA) LLC were the bookrunners.

Proceeds will be used to repay the company’s 7.63% notes due Aug. 29, 2014, to repay outstanding commercial paper and for general corporate purposes.

The electric company is based in Newark.

Dollar General tightens

Dollar General’s 3.25% notes due 2023 tightened to 69 bps bid, 64 bps offered, a trader said on Monday.

The notes were quoted on Aug. 5 at 157 bps bid, 149 bps offered in the secondary market.

Dollar General sold $900 million of the notes on April 8, 2013 at a spread of Treasuries plus 155 bps.

The discount retailer is based in Goodlettsville, Tenn.

Family Dollar better

Family Dollar Stores’ 5% notes due 2021 traded early Monday at 200 bps bid, 180 bps offered, according to a trader.

The notes were quoted on Aug. 5 at 260 bps bid.

Family Dollar sold $300 million of the notes on Jan. 25, 2011 at Treasuries plus 175 bps.

The discount retail company is based in Matthews, N.C.

Bank/brokerage CDS costs lower

Investment-grade bank and brokerage CDS prices were lower on Monday, according to a market source.

Bank of America Corp.’s CDS costs ended 1 bps tighter at 67 bps bid, 70 bps offered. Citigroup Inc.’s CDS costs also decreased 2 bps to 67 bps bid, 70 bps offered. JPMorgan Chase & Co.’s CDS costs fell 2 bps to 54 bps bid, 57 bps offered. Wells Fargo & Co.’s CDS costs were flat at 44 bps bid, 47 bps offered.

Merrill Lynch’s CDS costs closed 1 bp tighter at 70 bps bid, 74 bps offered. Morgan Stanley’s CDS costs ended 2 bps tighter at 74 bps bid, 77 bps offered. Goldman Sachs Group, Inc.’s CDS costs were 3 bps lower at 75 bps bid, 80 bps offered.

Paul Deckelman contributed to this review.

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