While demand for today's scheduled $500 million Texas Utilities Co. offering is said to be strong, not everyone's interested.
"The utility market has just been too rich," Jim Ho, a senior vice president at Boston-based John Hancock Mutual Funds, said.
Ho said, however, that the expected pricing of the Texas Utilities' offering appears to be fair given current conditions in the utility sector.
The first tranche of the Texas Utilities issue is expected to consist of $125 million of five-year noncallable bonds, a soume familiar with the offering said.
The second is expected to be $125 million of 12-year noncallable bonds, while the third is expected to consist of $250 million of 32-year bonds, he said. The third piece is noncallable for 10 years.
Price talk on the five-year piece is a 70 to 75 basis point spread over comparable Treasuries, while talk on the 12-year piece is in the area of 95 basis points over, the source said. Talk of the 32-year piece is 110 area over 30-year Treasuries, he said.
Moody's Investors Service is expected to rate the offering Baa2, while Standard & Poor's Corp. is expected to rate it BBB.
A Salomon Brothers spokeswoman said she could not confirm price talk. An official at the firm also declined to provide details on the offering.
As for yesterday's new issues, the Canadian Province of Saskatchewan arrived with a $500 million offering of its own, which Ho said was fairly priced.
The first tranche consisted of $200 million of 6.625% notes due 2003. The noncallable notes were priced at 99.833 to yield 6.648%. or 87 basis points over comparable Treasuries. The second piece consisted of $300 million of 7.375% debentures due 2013. The noncallable debentures were priced at 99.102 to yield 7.462%. or 79 basis points over comparable Treasuries. Moody's rates the offering A3, while Standard & Poor's rates it BBB-plus. Salomon Brothers Inc. lead-managed the offering.
In a release announcing its A3 rating, Moody's said the debt comes from the province's $1 billion shelf registration, which it filed with the Securities and Exchange Commission in May. Saskatchewan is expected to use proceeds to meet its budgetary requirements and for about $115 Canadian of refinancing needs.
In other news yesterday, USG Corp. said it has asked its bank group to exchange $142 million of new 10 1/4 senior notes due 2002 for $47 million of term capitalized interest noted and $95 million of outstanding term loans.
According to a USG Corp. press release, if the bank group approves the proposal, the exchange would eliminate all mandatory bank principal payments due before 1997.
The payments that would be pushed back are the $25 million of bank amortization in 1994, the $32 million in 1995, and $38 million in 1996.
Also under the proposal, the bank group would agree to change the rules regarding a "cash sweep," or the way in which excess cash would be allocated prior to 1996. Under the old credit agreement, the banks would have gotten any excess cash, a USG spokesman explained.
Under that proposed revision, the first $165 million of any excess cash flow USG generates could be used to pre-pay any public senior debt maturing before 1999. As for any cash USG generates during that period that exceeds the $165 million level, two-thirds would go to repay bank term debt in maturity order, USG would get one-third for permitted uses under the bank credit agreement, such as capital expenditures. debt repayment, and liquidity.
The proposal was presented to the USG bank group yesterday in Chicago. Two-thirds of the principal amount of the bank group must approve the amendment.
In secondary trading yesterday, spreads on high-grade bonds ended a slow day unchanged. High-yield issues were up 1/8 to 1/4 point across the board.
New Issues
Houston Light & Power issued $200 million of 7.50% first mortgage bonds due 2023. Noncallable for 10 years, the bonds were priced at 99.522 to yield 7.54%, or 85 basis points over comparable Treasuries. Moody's rates the offering A2, while Standard & Poor's rates it A. First Boston Corp. lead-managed the offering.
Federal Home Loan Banks issued $200 million of 5.24% notes due 1998 at par. Noncallable for a year, the bonds were priced to yield 20 basis points over comparable Treasuries. Merrill Lynch & Co. lead-managed the offering.
Geico Corp. issued $150 million of 7.35% debentures due 2023. The noncallable debentures were priced at 99.639 to yield 7.38%, or 70 basis points over comparable Treasuries. Moody's rates the offering Aa3, while Standard & Poor's rates it AA. Salomon Brothers managed the offering.
Burlington Northern issued $150 million of 7.50% debentures due 2023. Noncallable for 10 years, the debentures were priced at 98.53 to yield 7.625%, or 94.5 basis points over comparable Treasuries. Moody's rates the offering Baal, while Standard & Poor's rates it BBB. Merrill Lynch lead-managed the deal.
Standard & Poor's has given its preliminary AA-plus rating to Chesapeake & Potomac Telephone Co. of Virginia's $300 million of senior unsecured debt filed under a Rule 415 shelf registration. The rating agency also affirmed its AA-plus senior unsecured debt on the company. About $950 million of debt is outstanding.
The company will use issue proceeds to refinance debt, a Standard & Poor's release says.
"[Chesapeake & Potomac], a Bell Atlantic unit, has been able to sustain very strong creditworthiness despite high levels of investment needed to meet demand in its service area," the release says.
