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


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