Entergy Louisiana (ETR) is in the market offering 4MM $25 par first mortgage bonds. Details of the offering are (prospectus):
| Issuer | Entergy Louisiana LLC |
| Security Offered | $25 par First Mortgage Bonds (FMB) |
| Maturity | July 1, 2052 |
| Ticker | Will be NYSE listed |
| Coupon | 5.25% |
| Rating | A3/A- |
| Shares | 4,000,000 |
| Dividends | Quarterly 1/1, 4/1, 7/1 and 10/1 |
| Optional Redemption | July 1, 2017 |
| Security | The FMBs will be secured by a mortgage that constitutes a first mortgage lien on substantially all of our property |
| Use of Proceeds | The net proceeds from the offering of the New Bonds will be used either [A] to repurchase or redeem one or more series of our outstanding securities on their stated due dates or in some cases prior to their stated due dates or [B] for other general corporate purposes. |
Issuer
Entergy Louisiana was formed by the merger of all of the regulated utility operations of the Louisiana corporation, Entergy Louisiana, Inc., an electric public utility company providing service to customers in the State of Louisiana since 1927. The company is a public utility company engaged in the generation, distribution and sale of electric energy to approximately 663,000 customers in the State of Louisiana.
Relative Value
The relative value of these notes will be determined by looking at other $25 par seniors/FMBs within the sector. Unfortunately, the only other utility with outstanding $25 par bonds is Southern Company (SO), so the peer group is somewhat small (very small actually).
| Issuer | Ticker | Coupon | Price | CY | Call | Maturity |
| Entergy LA | ELA | 5.88% | $27.33 | 5.33% | 11/2015 | 6/2041 |
| Entergy LA | ELB | 6.00% | $26.74 | 5.61% | 3/2015 | 3/2040 |
| SO - Gulf Pwr | GUA | 5.75% | $29.65 | 4.81% | 5/2016 | 6/2051 |
| Southern Co | GAT | 8.20% | $28.74 | 7.14 | 11/2013 | 11/2048 |
The Gulf Power 8.20% due 2048 have a fat yield of 7.14% and look to be the best of the bunch. The high coupon makes this a call target, however, and the yield to call is -6.2% - just something to consider (especially as Southern Co just called the GAR 6.375% 2047).
Equity Snapshot:
A snapshot of the company's equity and key equity statistics (via Ycharts) is:
(click to enlarge)
The equity has not recovered since the 2008 correction and the key stats of the company do not provide a catalyst for near-term growth for the company.
Entergy Louisiana, however, has been well managed and continues to be profitable and modestly levered (48.7% debt/capital - which is on the low side for a utility). The company has increased their capital spending (which is built into ratebase) as they have been building out their nuclear capacity with the proposed River Bend project and their Nine Mile Point Unit 6 self-build.
Bottom Line: The new first mortgage bonds being issued by the company are somewhat attractive relative to their existing $25 par debt (by virtue of their call protection and hopefully liquidity as the deal was priced tighter than I would have expected) as well as Southern Company's $25 par debt. Importantly, there has never been a loss on an FMB in the last century (including ETR New Orleans, Portland General or any other formerly distressed utility), which only increases the security of this investment.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: This article is for informational purposes only, it is not a recommendation to buy or sell any security and is strictly the opinion of Rubicon Associates LLC. Every investor is strongly encouraged to do their own research prior to investing.
