6-9As expected, TXU Electric completed its stranded cost ABS, albeit at levels further discounted from a widened launch. The $790 million series 2004-A transaction, led jointly by Merrill Lynch and Wachovia Securities, cleared to yield three, 12.5 and 18 basis points over swaps, respectively, or 3.528%, 4.832% and 5.34%.
For longer dated, seven and ten-year paper, spreads widened significantly from Thursday’s guidance, at swaps plus three, 11 and 14 basis points. Sources close to the transaction noted that the further discounting prior to pricing reflected the issuer’s desire to hold coupon levels firm, while offering juicier yields to investors.
This represents the first stranded cost ABS of 2004, and the last since Atlantic City Electric sold $152 million of series 2003 paper via Morgan Stanley last December. TXU, formerly known as Oncor Electric, last sold RRBs in August, when it priced $500 million of 2003-1 notes via Lehman Brothers and Morgan Stanley.
| TXU Electric Delivery Transition Bond 2004-1 | |||||||||
| Seller: TXU Electric | |||||||||
| Date: 5/28/2004 | |||||||||
| Amount: $790 million | |||||||||
| Sector: stranded cost | |||||||||
| Class | Amount | MDY/S&P/FTC | Avg. Life | Benchmark | Guidance | Spread | Coupon | Price | Yield |
| A1 | $274.00 | Aaa/AAA/AAA | 3.00y | Swaps | +2-3bp A | +3bp | 3.52% | 99.9793 | 3.53% |
| A2 | $224.00 | Aaa/AAA/AAA | 7.00y | Swaps | +6-9bp | +12.5bp | 4.81% | 99.8740 | 4.83% |
| A3 | $292.00 | Aaa/AAA/AAA | 10.0y | Swaps | +10-13bp | +18bp | 5.29% | 99.6086 | 5.34% |
| Credit Enhancement: sr/sub | |||||||||
| Manager: Merrill Lynch, Morgan Stanley | |||||||||
| Notes: Settles: 6/7/2004; Co-mgrs: Banc of America Securities, Bear Stearns, Credit Suisse First Boston, M.R. | |||||||||
| Beal; Collateral: Texas | |||||||||