BankAmerica Corp. came to market Monday with $200 million of floating- rate Euronotes that could be attractive to foreign investors because of the dollar's recent surge in value.
Underwritten by Sanwa International PLC, the notes, due June 2000, carry a coupon of 17.5 basis points over the three-month London interbank offered rate, with a long first coupon to September 1995 that pays 17.5 basis points over four-month Libor.
While fixed-income analysts said that banks have increasingly turned to the capital markets to fund loan growth, they said a Euromarket issue was somewhat unusual.
BankAmerica, however, historically has made use of access to a host of market sources. "They like to keep their fingers on a host of funding sources, and this is an example of maintaining that presence," said Thomas G. Stone, a vice president at Duff & Phelps Credit Rating Co.
Driven by confidence in Congress' efforts to cut the federal budget deficit, the sudden surge in the dollar against the Japanese yen and the German mark could guarantee BankAmerica's notes an eager reception.
"A lot of Europeans are underinvested in United States companies," said Ann Robinson, a fixed-income analyst at Bear, Stearns & Co. "Now that the dollar has started to turn around, Japanese and European investors may be looking for investment opportunities."
Indeed, an interest in appealing to Japanese investors may explain the identity of the lead underwriter, Sanwa, a bank not known in the analyst community for active underwriting.
Analysts noted that U.S. banks generally were not seeking funds from the Eurobond market but that banks with large national names, like BankAmerica, and New York City-based banks have been exceptions.
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In other news, Moody's Investors Service in the last week downgraded $7.9 billion of PNC Bank Corp. debt and placed under review for a possible upgrading the ratings of Bank of Boston Corp.
PNC's subordinated debt was downgraded to A3 from A2; PNC Funding Corp.'s senior debt fell to A2 from A1 and its subordinated debt, to A3 from A2; and the rating for the long-term deposits and other senior and counterparty obligations of the Ohio, Kentucky, Delaware, and Pittsburgh banks was downgraded to A1 from Aa3.
Moody's said it was downgrading PNC because of the company's reduced profitability and increased leverage. Recent acquisitions, PNC's stock repurchase program, and the upcoming acquisition of Chemical Bank New Jersey are causing a decline in the company's capital ratios, the rating agency said.
The ratings had been placed under review Jan. 13.
Analysts said the market had already anticipated the Moody's downgrading, which follows a similar action by Standard & Poor's Ratings Group Feb. 17.
Spreads on PNC's debt changed insignificantly on the downgrading, proving that the market anticipates and discounts ratings changes, said analysts.
The "Moody's action really reflects the fact that PNC was never really a high 'A' credit," although it had achieved such ratings last year, said Ethan M. Heisler, a fixed-income analyst at Salomon Brothers Inc.
"The reasons for Moody's downgrade almost sounds like they're giving PNC a vote of confidence," Mr. Heisler said. In its announcement, Moody's commended the Pittsburgh-based bank franchise for its intention to maintain relatively solid capital levels.
The rating agency said it expects PNC to recover its net interest margin because of a planned runoff of the investment book and a selective reduction of lower-yielding corporate loans.
Bank of Boston Corp.'s bonds continued to improve in the last week, benefiting from both the Moody's action and the reelection of Argentine President Carlos Menem. Bank of Boston and Citicorp are the leading foreign banks in Argentina.
"Those are two thrusters under their rocket," said Mr. Heisler.
The Moody's review was prompted by Bank of Boston's improved core earnings and capital ratios. The review will focus on the bank's ability to maintain profitable operations in Latin America, its commitment to enlarging its capital base, and a planned expansion of its retail franchise.
