Chase Manhattan Corp. and Bankers Trust New York Corp. have sold $400 million in high-yield bonds for International Home Foods.
The debt deal, priced at 10.375%, closed on Tuesday. The deal was widely watched because of its large size and well-received because it was done in conjunction with a buyout by Hicks, Muse, Tate & Furst, a well-known junk bond firm.
The former food unit of American Home Products "has a nice stable business and is low risk," said Jerry Paul, a high-yield-portfolio manager who oversees about $2 billion in investments at Invesco in Denver.
"This is the type of deal that people like in this marketplace," said Tom Haag, a portfolio manager at the Lutheran Brotherhood in Minneapolis. "It's a big, liquid issue with a stable product base."
Investors said that commercial banks demonstrated the same level of market competence in the high-yield marketplace as their investment banking counterparts.
"The high-yield marketplace is dominated by former Drexel people," said a bank executive dealing in junk-bonds, referring to Drexel Burnham Lambert Inc., the now-defunct junk bond firm.
Chase served as adviser and led a $770 million loan with Bankers Trust and Morgan Stanley & Co. in the buyout of the American Home Products unit.
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J.P. Morgan & Co., Bankers Trust, and Citicorp joined Chase this week in filing with the Securities and Exchange Commission to issue hybrid preferred securities.
J.P. Morgan filed a shelf registration on Wednesday to issue up to $1 billion in preferred securities through JPM Capital and several other trusts.
Bankers Trust filed on Wednesday to issue $500 billion of the same securities through several trusts, one of which is BT Preferred Capital Trust I.
Citicorp filed on Monday to issue up to $100 million of preferred securities through Citicorp Capital.
The hybrid securities - commonly known as quarterly income preferred securities or trust originated preferred securities - are seen as an inexpensive way for banks to raise capital. Proceeds are tax deductible and qualify as regulatory capital under a recent Federal Reserve ruling.
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Norwest Financial, a unit of Norwest Corp. in Minneapolis, issued $150 million in five-year senior notes. The issue priced at 6.365% to yield 6.37%, for a spread of 27 basis points over comparable Treasuries.
The lead underwriter was Merrill Lynch & Co. Moody's Investors Service Inc. rated the issue Aa3, while Standard & Poor's rated it AA- minus.
