A weak dollar continued to pummel corporate bond prices yesterday, traders said.
"They opened up and just kept going south," one high-grade trader said, "The dollar is still getting absolutely murdered." Corporate losses moved step for step with Treasuries, he said.
"Our bonds are definitely going down," another high-grade trader said, though he said high grades were not hit as hard as Treasuries. He estimated that corporates lost about 75% of what the government market lost.
While not surprised by Friday's sell-off, the second trader thought intervention by foreign central banks would have helped bring stability back to the markets by now, he said.
"The dollar has been under extreme pressure," one foreign exchange source said yesterday. Low U.S. interest rates, the stock market's decline, and uncertainty concerning the presidential election have intensified that pressure, he said. The dollar has fallen by eight pfennigs against the German mark in seven days, he said.
The dollar and stock market's near 26-point plunge also caused "a little panic" yesterday in the high-yield market, which lost 1/2 to one point depending on the name, traders said.
The market expects to see nearly $500 million of new junk this week. Among those issuers is Tyco Toys Inc., which yesterday issued $110 million of 10 1/8% senior subordinated noted due 2002.
"Everybody seems to be pretty happy," Rick Anguilla, director of investors relations at Tyco, said yesterday concerning pricing on the issue.
Noncallable for five years, the notes were priced at par, a source familiar with the offering said. Moody's Investors Service rates the offering B1, while Standard & Poor's Corp. rates it B-plus. Kidder, Peabody & Co. managed the offering.
Rounding out this week's offerings are Wolverine Tube Inc.'s $100 million senior subordinated offering due 2002 through First Boston Corp. and Dillon, Read & Co.; Rogers Cablesystems Ltd.'s $150 million offering due 2012; and Orion Capital's $110 million of senior notes due 2002.
Price talk on Wolverine, expected midweek, is 10% to 10 1/4%, a source familiar with the offering said. Price talk for Rogers and Orion, both through Merrill Lynch & Co., was unavailable yesterday.
Another issuer, Adelphia Communications Corp., has filed with the Securities and Exchange Commission to offer up to $125 million of senior debentures due 2004, Leonard Cacchio, an official at the company, confirmed yesterday.
Adelphia will use proceeds to trim subsidiaries' bank debt. Salomon Brothers Inc. will manage the offering, the timing of which depends upon the SEC's review, Mr. Cacchio said. In May, adelphia issued $400 million of new debt, he said.
According to Securities Data Co., through last Friday, high-yield companies have issued 157 deals totaling $26.4 billion. That comes to more than two and a half times the $9.97 million representing 48 offerings done in all of 1991. The total so far this year still falls shy of the 226 issues totaling $31.9 billion of new junk that was issued in 1986, the all-time high.
Elsewhere, Nationsbank Corp. yesterday said it would redeem all $100 million of its 11 1/8% subordinated notes due 1997 on Oct. 1., a spokeswoman at the bank confirmed.
The bank will redeem the notes at 100% of principal amount plus interest to the redemption date. The Bank of New York will serve as paying agent.
Yesterday's Ratings
Moody's has lowered Cleveland Electric Illuminating Co.'s short-term debt rating to Prime-3 from Prime-2, but confirmed its long-term debt, the agency said yesterday. It also downgraded Cleveland Electric's preferred stock to Baa3 from Baa2.
The rating agency cited "increasing dividend payouts and declining earnings retention at CEI, an operating subsidiary of Centerior Energy Corporation." Moody's confirmed Cleveland Electric's Baa2 first mortgage bonds and secured pollution control issues and Baa3 pollution control bonds.
Standard & Poor's has upgraded Cooper Tire & Rubber Co.'s senior debt to A-plus from A and has affirmed the company's A-1 commercial paper rating.
The action affects about $200 million of long-term debt, according to an agency release.
"The upgrade reflects the company's continued strong operating performance and resultant strengthened financial profile," the release says.
Moody's has placed Federal-Mogul Corp.'s debt ratings under review for a possible downgrade, a release issued by the rating agency says. Moody's action comes after Federal-Mogul announced that it will acquire nearly all of TRW Inc.'s automotive after-market business for about $210 million. The ratings subject to review include the company's Ba 1 notes and debentures and Ba 1 industrial revenue bonds, the release says.
Moody's review "will focus on the impact the proposed transaction will have on FM's capital structure and prospective debt-protection measurements," the agency's release says. Moody's will also evaluate whether the potential acquisition will enhance the company's competitive position.
