U.S. Bancorp in Portland, Ore., this week came to market with debt featuring a 10-year put option for the first time.
The $200 million of 30-year subordinated debt comes at a time when put options are in vogue with bank issuers.
U.S. Bancorp, which has issued debt only five times in the last nine years, priced the debentures at 55 basis points over Treasuries to yield 7.512%.
Offering the put option to investors "has little downside, and it gave the company the ability to get the paper out quickly," said Thomas Ducharme, treasurer of U.S. Bancorp.
The issue has sold completely since its issue on Monday, he added.
Mr. Ducharme said the debt was unrelated to the bank's June acquisition of California Bancshares and was intended to raise capital for other corporate purposes. U.S. Bancorp generally has relied on deposits for its funding, but as with other banks its asset growth has outpaced growth in its liabilities.
Analysts said the 10-year put option on 30-year debt was less expensive to the issuer than a straight 10-year issue.
"Other issues with similar structures were trading at much richer levels," said Bill Ingram, a bond trader with Nationsbanc Capital Markets. Ordinary issues "were trading at 65 basis points over comparable Treasuries, but this issue came in at 55 basis points. This deal was priced on the cheap side of the market."
Mr. Ingram said that in the last year he has seen a "dramatic increase" in the number of "put-able bonds in the secondary markets." Investor demand for such debt structures has increased because of the cost savings and allows them to hedge their mortgage portfolios, he said.
Banks that have issued 30-year issues with a 10-year put option in the last year include First Union Corp., SouthTrust Corp., Suntrust Banks Inc., and Amsouth Bancorp.
Separately, Bankers Trust New York Corp. tapped the Euromarket again recently, issuing $300 million worth of pound-denominated Eurobonds. The five-year senior note issue has a floating rating set at the three-month London interbank offered rate plus 0.625%. Lead underwriter was Paine Webber International.
Bankers Trust's outstanding senior debt is rated A-1 by Moody's Investors Service and A-plus by Standard & Poor's.
