Israel Electric lone issuer in frozen US high-grade market

Tue Jul 2, 2013 4:00pm EDT

July 2 (IFR) - There were a couple of go/no-go calls on Tuesday, but in the end only an anticipated deal from Israel Electric Corp came to market - likely the only issuance in this holiday-shortened week.

Some renewed stability in Treasuries was not enough to coax hesitant issuers off the sidelines ahead of the Thursday holiday and Friday's payrolls number. The week of July 8 should now set the tone, perhaps for the remainder of the month.

Since most issuers who desperately needed capital have already got their trades done, there is a very little sense of urgency on syndicate desks to compel issuers to tap the market - and investors and issuers alike are still finding their feet in the changed pricing environment after a surge in rates following Fed Chairman Ben Bernanke's remarks about tapering the central bank's asset-buying program.

"The market needs one big trade to price and perform well to get things moving," said one syndicate banker.

Another said: "It is difficult to convince any borrower to come to the market right before a payroll number, especially during a holiday-shortened week and with all the recent volatility."

Israel Electric kicked off the second half of 2013's high-grade supply with a USD300m two-part tap of its outstanding five- and ten-year bonds - a USD1.1bn offering just priced on June 18. The trade attracted cross-over buyers and decent investor interest. The size was upped by USD100m, and the order book approached USD1bn.

As a warm-up to the payroll data on Friday, market players could look for leads on the Fed's stance on quantitative easing from other employment data set to be released on Wednesday - Challenger job cuts at 7:30am, the ADP report at 8:15am, and initial claims at 08:30am.

ISRAEL ELECTRIC

Israel Electric (Baa3/BB+ from Moody's/S&P) opened books on a tap of its outstanding five- and ten-year bonds. The issuer released initial price guidance of 101.5 area for a USD100m tap of its USD600m 5.625% June 2018s and 100 area for a USD100m tap of its USD500m 6.875% June 2023s. Barclays and Citigroup are the joint bookrunners. Settlement is on July 8, 2013.

LAUNCH: USD300m (upsized from USD200m) 2-part tap

-USD150m due 6/21/2018 (5.625% at USD101.750)

-USD150m due 6/21/2023 (6.875% at USD100.375)

PRICED: USD300m 2pt 144A/RegS tap.

- USD150m due 6/21/2018 at T+383.4bp (5.625%, reoffer price USD101.750, reoffer yield 5.219%). Total amount outstanding now USD750m

- USD150m due 6/21/2023 at T+433.7bp (6.875%, reoffer price USD100.375, reoffer yield 6.822%. Total amount outstanding now USD650m

BOOK SIZE: Roughly USD1bn

U.S. Treasuries..........

U.S. Treasury outlook...

U.S. corporate bonds....

U.S. agencies...........

U.S. mortgage-backeds...

U.S. asset-backeds......

U.S. municipal bonds... (Reporting by Mike Gambale; Editing by John Balassi and Marc Carnegie)