The primary market continued to slow down last week after a gangbuster start to the year. Investors say they are going to have to source bonds from the secondary market to feed any appetite they have because the new issue pipeline is not expected to pick up anytime soon. Here were some notable offerings.
*Calpine Corp. is planning a $2.3 billion deal that was in the syndicate process last week and is expected to be priced this week. The transaction is attracting a lot of attention from investors, partly because it is so large. Sai Choy, portfolio manager at Fisher Francis Trees and Watts, says he expects the secured notes will do well. He notes Calpine's ability to repay its debt appears strong, since it has moved from a construction phase, where it built up roughly 15 power plants, to a fully operational status. Choy sees this transformation as a clear indication that the secured notes will be a good bet. The electricity company is using the proceeds to replace existing construction loans with permanent financing.
*AES Corp. sold $500 million in unsecured senior 7 3/4% notes of '14 (B3/B-), which were priced at 98.28. One manager says the deal had to be priced at a discount and offer an 8% yield to attract investors, and that it seemed to come cheap compared to existing bonds. Citigroup Global Markets and Deutsche Bank underwrote the deal. Net proceeds will be used to repay $500 million of AES' term loan under its senior secured credit facilities.
