A $200 million high-yield bond offering led by a unit of Bankers Trust New York Corp. has attracted unusually strong interest from investors who normally favor better-grade debt.
The 10-year subordinated notes for Lear Corp. - a maker of car seats in Southfield, Mich. - were priced Tuesday at a slim 246 basis points above comparable Treasuries.
"A good chunk of the demand came from the higher-quality investors in the market," said Arthur H. Penn, a managing director and head of high- yield capital markets at BT Securities. "There's just not a lot to pick from, as high-grade investors continue to see historically low spreads."
While a more liquid market means more opportunities for sales, it also puts pressure on banks and other underwriters to focus on investors they might have overlooked.
Banks have been flocking into high-yield underwriting over the past few years as part of their drive to offer one-stop shopping to corporate clients. But investment banks are defending their turf.
"The high-yield area is one where investment banks are clearly beefing up," Mr. Penn said.
Standard & Poor's Ratings Group raised Lear's rating two notches, to BB-minus, from B, and Moody's Investor Services to B1, from B2, before the issue came to market.
Despite the upgrades, the offering faced an uncertain bond market. Last Friday, a trio of stronger-than-expected employment reports from the government sent bond yields soaring.
"We're satisfied with the execution because of the volatility in the market," said Donald Stebbins, a vice president and treasurer at Lear. "We knew it was a difficult market, given Friday's employment numbers and the stock and bond reaction to that."
Separately, CS First Boston continued to benefit from a full-service client relationships with Omaha-based Calenergy Co.
The bank played a host of roles in last year's acquisition of Magma Power Co.
The Zurich-based bank recently underwrote $135 million of senior secured investment grade bonds and joined with National Westminster Bank PLC in a $100 million, three-year revolving-credit facility.
Deregulation has positioned the energy industry for continued consolidation, which has provided banks with a host of financing opportunities.
"The revolver gives us the ability to take advantage of other opportunities as they surface, which includes acquisitions and enhancements to service," said Dale R. Schuster, a vice president at Calenergy.