Granite Broadcasting Unplugs Deal; Chairman Blames Market Conditions
Granite Broadcasting Corp. killed its $100 million junk deal Friday, confirming earlier indications that the deal was on the rocks.
W. Don Cornwell, the company's chairman and chief executive officer, said high-yield market conditions for that type of credit had soured over the past six to eight weeks, prompting the company to withdraw the offering's registration statement Friday.
"The purpose of the offering was to refinance all of the company's outstanding indebtedness with lower cost funds," Mr. Cornwell said in a press release issued Friday.
"Despite significant gains in net revenue and operating cash flow during the first quarter of 1992 and a continuing favourable business climate for the company in the second quarter, market conditions since the filing of the registration statement have become decidedly less favourable," the release says. Moving forward with the proposed offering would have required Granite to pay more for the funds than desired, the release adds.
Mr. Cornwell wanted to offer the debentures due 2002 at a yield of 11% or slightly higher. While he would not disclose what yield the market wanted, he said the company found it too expensive. Granite may return to the high-yield market later this year if conditions improve, but for now it can afford to wait, he said.
Kingman Penniman, an executive vice president at Duff & Phelps/ MCM Investment Research Co., said while Granite was one of the riskier deals to hit the market so far this year, it was not priced that way. He believes the offering should have yielded at least 12%.
"The market wants to be adequately compensated for the perceived level of risk."
Granite is a group broadcasting company that was founded in 1988 to acquire and manage network-affiliated television stations and other media and communications-related properties. Since its inception, the company has acquired four network-affiliated television stations.
Friday's Markets
In secondary trading Friday, high-yield bonds gained 1/4 point overall. High-grade bonds were unchanged in lackluster activity.
Reeves Industries Inc. issued $122.5 million of senior notes due 2002. The noncallable 11% notes were priced at 99.276 to yield 11.125%. The notes are callable at 104.125 in 1997, at 102.75 in 1998, 101.375 in 1999, and moving to par in 2000.
Moody's Investors Service rates the offering Ba3, while Standard & Poor's Corp. rates it BB-minus. Donaldson, Lufkin & Jenrette Securities Corp. managed the offering.
Standard & Poor's has assigned a preliminary rating of B to Wherehouse Entertainment Inc.'s $110 million of privately placed senior subordinated notes due 2002. The notes, which come with registration rights, are being issued in conjuction with a leveraged buyout of the company by Merrill Lynch Capital Partners and Wherehouse management.
Standard & Poor's has assigned a AAA rating to Pacific Guardian Life Insurance Co.'s claims-paying ability.
"The rating is based on a support agreement between Pacific Guardian and its parent, the triple-A rated Meiji Mutual Life Insurance Co.," a Standard & Poor's release says.
"As the fourth largest life insurance company in Japan and a member of the Mitsubishi Group, Meiji enjoys extremely conservative capitalization, strong operating efficiencies, and favorable investment performance," the release notes.
Duff & Phelps Credit Rating Co. has raised the credit ratings of Shawmut National Corp.; its second tier holding companies, Shawmut Corp. and Hartford National Corp.; and its two principal subsidiary banks, Shawmut Bank and Connecticut National Bank.
The agency upgraded Shawmut Corp.'s and Hartford National Corp.'s senior debt to BB-plus from BB. Hartford National's subordinated debt has been upgraded to BB from BB-minus, and the preffered stock rating of Shawmut National Corp. has been raised to BB-minus from B-plus.
The long-term deposit rating for Shawmut Bank and Connecticut National Bank has been upgraded to BBB-minus from BB-plus, and the short-term deposit rating has been reaffirmed at Duff 3. Duff & Phelps removed the ratings from Rating Watch-Favourable.
"The rating upgrades reflect the general improvement in the corporation's financial condition, including asset quality, capitalization, liquidity, and profitability," the Duff & Phelps release says. "A focus on strengthening balance sheet measures through problem asset reduction, reserve enhancement, and issuance of common stock has established the framework for improvement in the prospective operating performance of the corporation."
Moody's has given a B2 rating to J. Baker Inc.'s planned $65 million convertible subordinated note issue due 2002, the rating agency says in a release.
"The rating reflects the relative weakness in the company's main business line, licensed shoe departments; the yet unproven new businesses recently acquired; the potential for a write off of the Ames Department Store Inc. licensed shoe operations; and a modest earnings level," the Moody's release says.
"These factors are somewhat offset by moderate leverage and interest coverage and the potential for sales and profitability gains in the Casual Male and Wearguard divisions," the release says.
Fitch Investors Service has assigned a AAA rating to Sears Mortgage Securities Corp.'s $219.5 million multiclass mortgage passthrough certificates, Series 1992-7, the agency says in a release.
"The rating reflects the credit enhancement provided by the 7.25% mortgage pool insurance policy issued by General Electric Mortgage Insurance Corp. and a $8.4 million reserve fund," Fitch's release says.
