The Republic of Italy priced it highly successful $5.5 billion glob al bond offering yesterday.
"It went very well," a source familiar with the issue said. "It was a broad distribution in all the major selling centers."
Demand for the $3.5 billion, 30-year piece was in the $4.5 billion-plus area, while demand in the $2 billion, 10-year piece ranged fro, $2.5 billion to $2.75 billion, another source said. Both the 10-year and 30-year tranches came at the low end of price talk.
In the after-market late yesterday, the 10-year piece was maintaining its original 62-basis-point spread to comparable Treasuries, while the 30-year piece, priced originally at 80 basis points over, tightened slightly to 79 1/2 bid, the first source said.
Among the most notable aspects of the deal was the level of European interest in the 30-year tranche.
"The conventional wisdom is that Europeans don't want to go out that far." the second source said.
But not everyone was interested. While acknowledging the offering's success, Barbara Kenworthy, a portfolio manager at Dreyfus Corp., did not participate.
"I thought it was a shade tight," Kenworthy said. Even though the global bonds were denominated in U.S. dollars, they still falls into Kenworthy's foreign basket, to which she can dedicate only a certain percentage of assets.
At those spreads, Kenworthy thought she could find better value elsewhere.
Robert Hickey, an assistant vice president and portfolio manager at Van Kampen Merritt Inc., in Chicago, also passed.
"The size of it really kind of scared us," Hickey said, adding that he does not see much room for the deal to trade up.
Also, despite the AA rating the deal received from Standard & Poor's Corp., Hickey thinks of it as a single-A credit. Like Kenworthy, he has limited space for foreign deals, Hickey said. He said there are a number of sovereign deals other than Italy that he would rather own. Though it's not in the market yet. Hickey said he thinks the Republic of Portugal's $1 billion deal will offer more value.
The first tranche of Italy's offering consisted of $3.5 billion of 6.875% global bonds due 2023. The noncallable bonds were priced at 98.725 to yield 6.977%, or 80 basis points over the old 30-year Treasury bond.
The second tranche consisted of $2 billion of 6% bonds due 2003 at par. The noncallable notes were priced at 99.851 to yield 6.02%, or 62 basis points over comparable Treausuries.
Goldman, Sachs & Co. and Salomon Brothers Inc. were joint lead managers. Moody's rates the offering A1. while Standard & Poor's rates it AA.
As for Portugal's deal. a Merrill Lynch & Co. spokeswoman yesterday declined comment when asked when the offering was expected to arrive. The deal is expected to be brought through Merrill Lynch & Co. and IBJ International Plc.
As for Portugal's deal, a Merrill Lynch & Co. spokeswoman yesterday declined comment when asked when the offering was expected to arrive. The deal is expected to be brought through Merrill Lynch & Co. and IBJ International Plc.
A deal by the Province of Ontario was also rumored yesterday. Ron Otsuki, an official with the province, said Ontario has a policy of not commenting on whether it plans to price a new issue. He suggested, however, that the rumors may have been fueled by the province's decision to increase its U.S. commercial paper program from $1.2 billion Canadian to $2.5 billion Canadian.
The Province of Manitoba on Wednesday filed a shelf registration with the Securities and Exchange Commission to offer up to $550 million of debt, according to Ivan Sabourin, an analyst there.
The filing brings Manitoba's total amount of debt on the shelf to $1.2 billion, Sabourin said.
The filing was done to restore to a "comfortable level" the amount of shelf debt that the province has available, he said. Asked if Manitoba was contemplating a new issue, Sabourin replied, "Not necessarily, no."
Deals in the wind for next week include investment-grade offerings by Public Service Electric & Gas Co. and Atlantic City Electric Co. Public Service is expected to offer $300 million of 30-year first and refunding mortgage bonds on Tuesday through competitive bidding. Atlantic City is expected to offer $80 to $1 00 million of 30-year first mortgage bonds, also through a competitive bid on Tuesday.
The high-yield market is expecting deals by Cole National, PMI Acquisition, and Texas-New Mexico Power. PMI Acquisition could arrive earlier, however.
Cole National is expected to offer $190 million of senior notes due 2000, while PMI Acquisition is seen offering $200 million of senior subordinated notes due 2003. Texas-New Mexico is expected to offer $100 million of first mortgage bonds and $140 million of secured debentures.
In secondary trading, spreads on high-grade issues ended unchanged as prices followed Treasuries lower. High-yield bond prices ended slightly higher.
New Issues
Flagstar Corp. reportedly issued a two-part offering totaling $400 million. The first tranche consisted of $275 million of senior notes due 2001 at par. The noncallable notes were priced to yield 10.75%. Moody's rates the offering B1, while Standard & Poor's rates it B-plus.
The second tranche consisted of $125 million of senior subordinated notes due 2003 at par. Noncallable for five years, the notes were priced at par to yield 11.375%. Moody's rates the offering B2, while Standard & Poor's rates it B-minus. Morgan Stanley & Co. was lead manager of the offering.
Federal National Mortgage Association issued $250 million of 5.93% notes due 2003 at par. Noncallable for three years, the notes were priced to yield 54 basis points more than comparable Treasuries. Salomon Brothers was sole manager of the offering.
Banc One Arizona issued $150 million of 6% subordinated notes due 2005. The noncallable bonds were priced at 99.148 to yield 6.101, or 73 basis points more than 10-year Treasuries. Moody's rates the offering Al, while Standard & Poor's rates it AA-minus. C.S. First Boston was sole manager.
Florida Power. & Light issued $125 million of 7% first mortgage bonds due 2025 at par. Noncallable for 10 years, the bonds were priced to yield an 84 basis point spread over 30-year Treasuries. Moody's rates the offering A2, while Standard & Poor's rates it A. Goldman, Sachs & Co. won competitive bidding to underwrite the offering.
Florida Power & Light issued $125 million of 5 3/8% first mortgage bonds due 2000 at par. The noncallable bonds were priced to yield 44 basis points over comparable Treasuries.
