Sempra Energy to Sell Baby Bonds

Utility Sempra Energy (NYSE:SRE) will be selling a new issue of baby bonds.

The subordinated notes will have a maturity in 2079 with an early redemption option available to the company in 2024.

These baby bonds will have the deferment clause in them, as most of the utility baby bonds do, which allows for deferment of interest payments for up to 40 consecutive quarters, once or more, without a default being declared.

We have not found a rating for the notes with either Standard and Poor’s or Moody’s as of yet, although these should be investment grade.

The preliminary prospectus can be seen here.

34 thoughts on “Sempra Energy to Sell Baby Bonds”

  1. Sempra has 2 outstanding preferreds, SRE-A and SRE-B. Both issued at $100 and are mandatory convertibles. Neither has been rated. Both have held up well, except for a dip in December, 2018. Sempra wrote off $351 mil EBT for the 2007 wildfires. However, a March 17, 2018 Seeking Alpha article, Hale Stewart, states that Sempra has no exposure to the recent Calif wildfires. It appears that approximately 40% of Sempra’s revenues are generated by electric distribution thru San Diego Gas & Electric. Caveat Emptor.

  2. Tim, please extract the comments about the Dominion Energy equity offering out of the “reader initiated alert” thread, and set up its own article. I would appreciate your thoughts on this issue.

    Sorry for the off-topic comment but AFAIK you still don’t have a “contact me” link where we can make back-channel requests like this.

    1. Hi Larry–things will change when I no longer work a “real job”. I started social security in May, but still have my appraisal business so am very limited in time for the moment.

  3. A San Diego based company with some exposure to California utility risks. The question is how much?

    1. NEW YORK (S&P Global Ratings) June 10, 2019-As the start of the 2019 wildfire season in California approaches, S&P Global Ratings is providing a
      forward-looking assessment of the credit risks and potential ratings ramifications that California’s regulated electric utilities continue to face.

      SRE-outlook negative if you can’t pull up full report for some reason. I’m interested to see how the pricing reflects the risk.

      1. The common (which I own) hit an all time high today. The charts look amazing on SRE.

        Also note, that CNP got an upgrade today.

        D didn’t even flinch on the offering yesterday. The common up over a dollar yesterday/today.

        Ute’s are the place to be, for me.

        1. A4I, I understand D and CNP. I bought some D equity units yesterday. Large offering that basically sold out first day. SRE is a little different and interested to see how offering prices CA wildfire risk…. or ignores it completely.

        2. Affinity4 – thank you for the heads up on CNP-B about a week ago. Picked up some at 50 and nice to see it pop up.

          1. You’re welcome! Another possible play is CPE-A. 10% preferred, went ex-date today. They are supposed to announce the redemption of it at any time as they have ‘completed’ the sale of assets to finance the redemption, yet, they haven’t announced the call yet. May be some meat on the bone still. I’m staying in for now and awaiting a response from IR as to when they might announce. At the current price, not much chance at all of losing any money… seems break-even at worst if they announce a call this week… if not, will keep riding this one.

            Flipped out of AQNB and will roll into AQNA or DOMGL for the higher payouts.

            IPWLK is also at ex date today, so it’s essentially selling below par if you count the next divvy. It’s split IG and QDI. I’m in that one also.

            1. Affinity – Re CPE-A has there been any public statement to the effect that they intend to use asset sales to call it? I don’t know the company at all and only did a quick look at the quarterly CC and the most recent SEC filings and I didn’t notice any direct commentary toward CPE-A. I did see statements such as “All of these factors are important in contributing towards our achievement of reducing our leverage below two times net-to-debt – excuse me, net debt to adjusted EBITDA in the near term, leverages the metric with the highest rating in our overall compensation program for 2019,” but with the preferreds shown under shareholders equity, would retiring them actually help or hinder that goal? I’m way over my skiis on this, so I’m just asking, not doubting….

                1. Thanks, A4I. Good to see them mention the preferred specifically as opposed to merely deleveraging or “debt reduction.”

            2. The DOMGL appear to be a nice issue

              I am confused by the description of the securities by Quantiumonline

              Do these securities basicaly convert to D shares at 6/2022 automatically?

              Or am i missing something?

              Thanks

              1. Good morning PickN!
                See discussion on RIN. I advise also reviewing Prelim Prospect on company website.

      2. I bought only 50 shares of SRE-B at IPO $101.14 per share on 7/12/2018. This is mandatory convertible to common on 7/15/2021. 6.75% coupon trading slightly above $102. Upon google search, the wildfire risks can be accessed as follows:
        https://www.voiceofsandiego.org/topics/news/sdge-says-theres-a-100-chance-itll-start-or-contribute-to-a-major-wildfire/

        https://www.sempra.com/newsroom/press-releases/sdges-2019-wildfire-mitigation-plan-builds-past-successes-further
        Key phrase from MStar (abbreviated version available at Schwab.com for those who have account at Schwab):
        “While we view California’s regulatory environment less constructively than in other states, Sempra’s emphasis on distribution-related safety and reliability infrastructure upgrades provides an attractive growth opportunity. Its investments are squarely in line with the regulators’ goals under California’s RAMP program. This program focuses on risk mitigation across the utilities’ footprint.”. Apparently, Sempra also owns utility in Texas. MStar gives it two star which Schwab rated below par for common, because MStar considered the common is overvalued. I should remember to cash out before year end or so 2020 or early 2021, depending on common share prices. Hope this info may help us to evaluate the upcoming baby bond. IMHO, it has immaterial credit risk for Sempra except climate change which should not be underestimated. Fido analysts neutral. Moody long term rated quite high with Negative outlook.

        1. Sempra has been rated considerably higher than Edison International. Both with Negative outlook. Then I do thank Gridbird for SCE-L and I bought much more SCE-H, extending the same principle following Gridbird’s teachings. Currently seems overvalued.

          1. John, please keep a close eye out on SCE. They have announced a few months back more hits to the fire exposure than previously thought. They could be a fire away from severe problems. Their preferreds are a bigger part of their capitalization. PGE barely has a blip of preferreds and they immediately suspended them when the trouble initially hit.
            SCE is also losing power customers due to a new consortium available to customers. So they will be relying on T&D. They also are trying to get the abandoned customers to help pay for the fire damage. I havent kept up real close recently since I am out (I overloaded into the Spire preferred when it came out) but this will need to be monitored. Plus the debt downgrade ratings are there plus fire season is fast upon them now.

            1. Hi Grid–thanks for expanding on that discussion. Was the first thing I thought of when I saw the new issue, but didn’t have time to expand on it.

            2. Thanks, Gridbird. About a month ago, I bought UTG, the venerable closed end mutual funds always recommended by the fallen Bond King, Bill Gross, after failing to recognized that UTG was good but bought at the EXACT wrong timing by Rida’s machine (it was like falling knives upon Fed’s want to raise rates incessantly. It is slightly up compared to . Today, only $0.20 below the 52 week Hi, finally corrected a little. Like Affinity4Investing opined, utility could be okay with Feds restrained from raising the rate, possibly reductions but with huge deficits plus hidden inflation. Paid too much for AQNB and STCBP. Lots of booby traps set by greedy market makers. Two neophytes in Doug’s love the Dutch VOYA preferreds. I probably should sell off some SCE-L but no place to invest. UTG is down now only pennies. JCAP could be good. Wish that I bought more just a week ago. Sold all my SCE-L collecting 1 Q worth QDI with small cap loss. SEC-H is well covered. Bought just tiny amount of JCAP with limit order for the ASK. Affinity4Investing is right on. Unbelievable, UTG is now up very close to 52 week high. I never had luck with VPU (Vanguard zero commission) utility. Then this time may be different. I still like UTG better but must wait with price just 4 pennies below 52 week Hi. If I recall from the past, the CEO of JCAP was extremely ambitious, issuing more commons to buy more. This could be headwind. Wish I bought more of Richard Hill’s TDE, up after ex div. today.

              1. John,
                Compare UTG to UTF. I personally rolled out of UTG in favor of UTF many months ago. Pretty stunning performance difference. +13% over the past year, for example.

                1. I bought into UTF ~$19 over 2 years ago and it’s been a great hold for me. There were times of price fluctuation but always resumed an upward trend. As always when a security does well my go-to comment is my only regret is that I didn’t pick up more..

                  1. Affinity and Blue Claw, coming from Preferreds/ETDS from SWANS to held too long Amtrust and Richard Lejeune’s disaster TOO-E and DLNG-B, I had UTF, seeing always going down because Rida Morwa had a habit of Extremely timing. Added more after MStar suggesting that it is grossly undervalued. Then I sold out and took profit when the Trade War appeared intense with all FANG going down quickly. Last Friday I saw Mrs. Brehm wrote OFS, long by FIDO small cap but with decent HUGE dividend history, I bought it from my IRA account. This is another scary closed end fund. I hope that I can unload after ex dividend and then get something tamer, perhaps like JCAP (sold some JCAP-B) unbelievable how market views this one. I should look at MStar on UTF again.

                    1. John, haven’t bought into the ones you mentioned in your post. My running ROI including paid dividends and unrealized cap gains on UTF is 50.58% for the 2 years 5 months holding. At the time my DD figured that utilities, pipelines, toll roads, airports, railroads, ports, telecommunications companies and other infrastructure companies would hold up. I was also considering Macquarie Global Infrastructure Fund (MGU), which invests globally but choose UTF. Haven’t followed MGU but it looks like it’s been doing good, as well. As of yesterday stats, MGU is trading at a ~ -12% discount with a 6 month average ~ -15%.. UTF currently, -4% with 6 month average ~ -6%..

Leave a Reply

Your email address will not be published. Required fields are marked *