The deal will be guaranteed by triple-A rated monoline insurer Ambac and will pay 80bp over the 8% 2021 Gilt to its bullet maturity in 2022. It will be accompanied by a shorter dated, unwrapped Yankee bond arranged by the same joint bookrunner and for the same borrowing vehicle. "The roadshow in the US has produced some very positive signs, and we are building a book," said an official at one of the lead managers.
The transactions refinance part of the bank debt that California Energy raised in January when it paid £780m for Northern Electric. The sterling deal will be the largest and longest bond yet brought for the holding company of a regional electricity company (REC), as well as the first to be insured by a monoline.
"Standard & Poor's in particular has improved its view of REC holding companies' credit this year, as they have issued more regularly," said the bank official. "It has become clear that the companies are separate from their US parents, with independent directors, and that their business is restricted to owning a REC."
"The wrap was attractive because Ambac is better placed to recognise that level of credit strength than the public market," the official added.
CE Electric Funding Co is rated Baa1 by Moody's, BBB+ by S&P and A- by Duff & Phelps. Northern Electric is rated A3/BBB+/A, reflecting how close it is to the assets.
California Energy has developed power generation and distribution facilities in the US, Asia and Latin America. It is listed in London, New York and on several Asian stock exchanges. *