New Southern National Comes to Market With $250 Million Corporate Debt

Fourteen months after its merger with BB&T Financial Corp., the "new" Southern National Corp. came to market on Tuesday with a $250 million issue of subordinated notes.

The issue is the first since the acquisition in February 1995, and the first debt the company has sold at the corporate level.

J.E.B. Davis, senior vice president of the financial division who helped hammer out the deal, said the company has issued debt at the bank level rather than the holding company level in the past.

Mr. Davis said the issue was unrelated to the merger, noting, "We wanted to have funding for our bank and nonbank subsidiaries."

However, the bank's larger size after the merger made the debt more attractive to investors, said Jay Weintraub, a bank bond analyst at Merrill Lynch & Co.

Mr. Weintraub pointed out that when small banks do come to market their issues are less liquid. Given its new bulk, Southern National is more easily recognizable in the market, he said.

The seven-year, noncallable notes were priced to yield 7.096%. The pricing, at 56 basis points over comparable Treasuries, was appropriate for an issue of subordinated notes, analysts said.

"It is fairly priced both to the company and the investor," said Allerton G. Smith, a bank bond analyst at Donaldson, Lufkin, & Jenrette.

The deal was led by Merrill Lynch. Underwriters also included Dean Witter Reynolds and Alex. Brown & Sons.

Citicorp also came to market on Tuesday with $250 million of subordinated notes.

The 10-year, noncallable issue was priced to yield 7.195%, or 58 basis points above comparable Treasuries.

One analyst was skeptical of the pricing, saying, "The right level should actually probably be 61 or 62 basis points" over comparable treasuries.

But Mr. Weintraub said the pricing was consistent with other similar issues.

Goldman Sachs & Co. was lead underwriter.

Separately, Fitch Investors Service granted an A-plus rating to Household Finance Corp's. $250 million of 7.25%, 10-year notes.

The rating is based on good asset quality, greater core business momentum, and a sound financial condition.