ENB Issues 30-Year Bonds at 5.12%

The Wall Street Journal reports:

Pipeline operator Enbridge Inc. (ENB) raised a total of C$300 million from two bond issues, according to a person familiar with the matter.

Enbridge raised C$200 million from an issue of 10-year bonds maturing in February 2021. The offering was priced at 138 basis points over the revelant benchmark curve, or at the low-end of the guidance, for a yield of 4.266%. The bonds carry a coupon of 4.26%.

The Calgary-based company raised another C$100 million from an issue of 30-year bonds maturing in September 2040. The bonds were priced at 170 basis points over the government of Canada 5% 2037 benchmark, or in line with guidance, for a yield of 3.420%. The bonds carry a coupon of 5.12%.

Additonally, DBRS notes:

DBRS has today assigned a rating of “A” with a Stable trend to Enbridge Inc.’s $200 million 4.26% unsecured medium-term notes (Notes) issue maturing February 1, 2021 and its $100 million 5.12% Notes issue maturing September 28, 2040. The issues are expected to settle on September 28, 2010.

The Notes rank equally with all of Enbridge Inc.’s other senior unsecured indebtedness. Net proceeds from the issue will be used for general corporate purposes, which may include repayment of outstanding indebtedness and financing capital expenditures and investments of Enbridge Inc.

This is interestng in light of ENB.PR.A, a straight perpetual issued in December 1998 with a coupon of 5.5%, now quoted at 25.35-43 for a current yield of 5.42% and a YTW of -7.12% based on an immediate call at par.

If we say that the Seniority Spread should be 220bp for an Enbridge straight (a little tighter than the 245bp reported September 22 to account for its scarcity value as a non-financial) and tack on another 25bp for option effects on a par issue, we come up with a projected new issue for ENB at 5.12% + 225bp + 25bp = 7.62% interest equivalent or 5.44% as dividend … which means that, insofar as you can trust the 225bp and 25bp wild guesses estimates, ENB.PR.A is fairly priced relative to their bonds.

Whether Enbridge is happy about the 225 Seniority Spread is, of course, another question entirely.

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