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San Diego Gas & Electric Matches Record Low J&J Rate in 30-Year Bond Sale
San Diego Gas & Electric Co., the third-largest investor-owned gas and electric utility in California, sold 30-year bonds at the same interest rate as Johnson & Johnson, matching the lowest coupon on record for debt of that maturity.
The Sempra Energy unit, ranked five levels below drugmaker J&J by Moody’s Investors Service and Standard & Poor’s, sold $500 million of 4.5 percent securities that yield 88 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. The debt, graded Aa3 by Moody’s, the fourth level of investment grade, hasn’t yet been rated by S&P.
J&J, one of four nonfinancial companies with the same top grade the credit raters assign to U.S. government debt, and San Diego Gas & Electric are among companies that have sold at least $10.4 billion of 30-year bonds this month, the most since March, as they take advantage of yields on the securities near the lowest in at least 23 years.
“Despite the continued rally in Treasury rates, investors have a strong appetite for long-duration securities,” said Andrew Karp, head of investment-grade syndicate for the Americas at Bank of America Corp., one of the managers of the sale. “Anytime that rates drop or spreads tighten, investors will consider other opportunities to recapture lost yield, and they’ll think about moving out the curve to do that,” Karp, based in New York, said.
San Diego Gas & Electric’s bonds yield 4.568 percent, a record low for 30-year corporate debt, according to data compiled by Morgan Stanley, one of the banks managing the sale. J&J’s bonds yielded 4.63 percent, Bloomberg data show.
Treasury Yields
The average absolute yield on investment-grade debt maturing in more than 15 years declined to 5.43 percent on Aug. 19, according to Bank of America Merrill Lynch index data, the lowest since the daily index tracking such bonds began in 1986.
Yields on 30-year Treasuries have fallen 29 basis points to 3.661 percent from 3.948 percent on Aug. 12 when New Brunswick, New Jersey-based J&J sold its bonds. A basis point is 0.01 percentage point.
BNP Paribas and Credit Agricole SA also managed the sale, according to a prospectus filed with the Securities and Exchange Commission.
Proceeds will be used for working capital, electric and gas procurement, plant improvements and repayment of commercial paper, San Diego Gas & Electric said in the prospectus.
San Diego Gas & Electric last sold debt on May 10, when it issued $250 million of 30-year, 5.35 percent bonds that paid a 95 basis point spread, Bloomberg data show.
To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net
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