Bank of New York issues notes in plan to shed expensive debt.

In preparation to redeem expensive debt, Bank of New York Co. issued $250 million in 10-year subordinated notes on Tuesday.

The notes were priced to yield 6.55% and were sold via a competitive bid won by Goldman Sachs & Co. The selling concession is $3 and the reallowance is $2.50.

Bank of New York's cost to issue the notes was about 78 basis points over Treasuries. Goldman offered the notes at a spread of 72 basis points, which a source at the bank characterized as a "pretty good" spread.

The notes were rated Baa1 by Moody's Investors Service Inc. and A-minus by Standard & Poor's Corp.

This is the banking company's second debt issuance in the past six months. In June, the bank issued $300 million in 10-year notes that yielded 6.625%.

The bank will use part of the $550 million in proceeds from those two debt sales to redeem $400 million in outstanding equity-contract notes, which are due 1997, according to William Burns, vice president for financial planning at the bank.

The notes that are slated for redemption are floating-rate notes with a floor that currently pay 5.25%. Many banks issued these types of notes in the early 1980s and have since redeemed them.

Bank of New York believes it can issue debt on less costly, terms, considering that short-term rates are well below 5.25%,

"If we can get 6.5% fixed, we can do better than 5.25% floating," said Mr. Burns.

Demand for Bank Debt

Low interest rates as well as strong demand for bank debt has worked in favor of banks that want to raise money in the capital markets.

Comerica Inc. on Monday, for example, issued $150 million in 20-year notes. The bank paid investors just 80 basis points over comparable treasuries. The yield to maturity was 7.183%.

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