Exelon supplements capex with US$900m CB
Exelon eased into the convertible bond market on Monday with a US$900m raise to repay higher-cost bank debt, making it the latest in a progression of regulated utilities looking to the CB market as a lower-cost alternative to straight debt.
JP Morgan, Barclays, Morgan Stanley, Bank of America, Citigroup and Goldman Sachs were joint bookrunners on the sale of the 3.25-year CB priced at a coupon and conversion premium of 3.25% and 25%, toward the investor-friendly ends of 2.875%–3.375% and 25%–30% talk marketed for one day.
Highlighting the pinpoint pricing for an IG-rated utility, the banks guided accounts toward a credit spread and implied vol of SOFR+90bp and 18.
Exelon, the parent of Illinois utility Commonwealth Edison, is using the money to repay commercial paper and short-term borrowings. As of September 30, it had US$580m of CP borrowings outstanding on which it paid 4.29%.
Exelon is selling stock at a premium to what currently is a near all-time high share price.
Exelon shares fell 3% on Monday to US$45.69, setting the conversion price on the CB at US$57.11. That compares with a 52-week high of US$48.51 in October and all-time high of US$50.71 in early 2022.
In September, Exelon raised US$1.05bn from a two-part sale of 10-year and 30-year bonds at its PECO subsidiary at rates of 4.875% and 5.65%, indicating at the time that it had completed its funding plans for the year.
PPL Corp last month issued US$1bn from the sale of a five-year CB at a 3% coupon and 25% conversion premium to its share price at the time. CMS Energy (3.125%, up 25%), FirstEnergy (3.625%/3.875%, up 20%/20%) and WEC Energy (3.375%, up 22.5%) are other regulated utilities that have recently funded in the CB market.