Duke Energy Prices Baby Bonds

Giant electric utility Duke Energy (NYSE:DUK) has priced their new subordinated debentures with a coupon of 5.625%– a hair above where I thought they might price it–I was thinking maybe 5.50%.

As expected the issue is rated BBB by S&P and Baa2 by Moodys–investment grade.

The issue has a maturity date 9/15/2078 with an early redemption option starting 9/15/2023.

Interest payments on the bonds can be deferred for up to 40 consecutive quarters–any deferred payments will accrue and compound quarter at 5.625%.  Of course anytime any corporation defers interest payments they are in serious financial hurt so we would only consider this a minor condition negative in a buying decision.  Personally we probably have no interest at this time as the maturity date is further than we care to own at this time.

Because of the long dated maturity of this issue it likely will have pricing pressures if we see long interest rates (10-30 year bonds) move further higher.

The pricing term sheet can be found here.

2 thoughts on “Duke Energy Prices Baby Bonds”

  1. Seems like a similar rating to CMS Energy at the same rate of 5.625%. At one point, CMSA traded down to $24.06. DUK is a more attractive name than CMS Energy but if it follows similar pattern and trades down significantly, I might nimble (half my normal amount) for a 1 year trade.

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