An Australian company's $750 million offering yesterday became the biggest bond deal ever to come up from Down Under.
"It went very well, it's a huge deal," said Michael Dee, a principal at Morgan Stanley & Co., which served as lead manager on the offering by BHP Finance (USA) Ltd.
BHP Finance issued the notes on behalf of Broken Hill Proprietary Co., which guaranteed the three-part offering, he said.
Aside from being Australia's biggest bond deal ever, the offering was also the largest Yankee bond deal ever by a corporate issuer domiciled outside the United States, Dee said.
The first tranche consisted of $250 million of 7% notes due 1997. The noncallable notes were priced at 99.689 to yield 7.075%, or 105 basis points over comparable Treasuries.
The second tranche consisted of $250 million of 7.875% notes due 2002. The noncallable notes were priced at 99.218 to yield 7.99%, or 120 basis points over comparable Treasuries.
The third piece consisted of $250 million of 8.5% debentures due 2012. The noncallable debentures were priced at 99.667 to yield 8.535%, or 100 basis points over 30-year Treasuries.
Moody's Investors Service rates the offering A2, while Standard & Poor's Corp. rates it A.
The 20-year tranche attracted most of the buyer interest because of the shape of the yield curve, Dee said.
The company was a relative unknown in the United States when the underwriting process started, but investors apparently liked the story as shown by their strong interest in the deal's longest piece, he said.
BHP filed a $750 million shelf registration on Oct. 28 and decided to issue now because of the attractive interest rate environment.
Dee said issuing Yankee bonds makes sense for the company, which is engaged in the steel, mineral, and petroleum businesses. Though based in Melbourne, two-thirds of its sales occur outside Australia. The company sells to 50 countries, conducts operations in 20, and has 70% of its revenues linked to U.S. dollars. A BHP spokesman added that more than a quarter of the company's assets are non-Australian.
"We see ourselves as being very much as a global resources company," the spokesman said. Yesterday's offering is part of the company's strategy of accessing the global capital markets, he said.
"It went very well," the spokesman said of the offering. He added that the company would like to tap the Yankee market in the future.
The company has already issued commercial paper in the United States and has been listed on the New York Stock Exchange since 1987.
The underwriting group also included Goldman, Sachs & Co.; Merrill Lynch & Co.; and J.P. Morgan Securities Inc.
In other news, Olympia & York Developments Ltd. spokesman Frank Ternan said the troubled Canadian company continues to work with creditors, but no resolution has been reached concerning a change in its proposed restructuring plan. A vote on the plan is scheduled between Nov. 25 and Nov. 30.
In secondary trading, high-grade corporate bonds moved in line with Treasuries, which lost about 1/2 point in the long end. High-yield bonds ended about 1/4 point lower.
New Issues
The Bank of New York issued $250 million of 7.875% subordinated notes due 2002. The noncallable notes were priced at 99.839 to yield 7.90%, or 112 basis points over comparable Treasuries. Moody's rates the offering Baa1, while Standard & Poor's rates it BBB-plus. Salomon Brothers lead managed the offering.
Bank One Columbus issued $150 million of 7.375% subordinated notes due 2002. The noncallable notes were priced at 99.338 to yield 7.47%, or 68 basis points over comparable Treasuries. Moody's rates the offering A1, while Standard & Poor's rates it AA-minus. Lehman Brothers lead managed the offering.
Citicorp issued $150 million of 8.625% subordinated notes due 2002. The noncallable notes were priced at 99.926 to yield 8.636%, or 185 basis points over comparable Treasuries. Moody's rates the offering Baa3, while Standard & Poor's rates it BBB-plus. Lehman Brothers lead managed the offering.
Federal Home Loan Mortgage Corp. issued $100 million of 7.550% debentures due 2007 at par. Callable after five years, the debentures were priced to yield 76.5 basis points over 10-year Treasuriese. First Boston Corp. sole managed the offering.
Chesapeake & Potomac Co. of Va. issued $100 million of 7.625% debentures due 2012. The noncallable debentures were priced at 98.838 to yield 7.74%. or 20 basis points over 30-year Treasuries. Moody's rates the notes AAA, while Standard & Poor's rates them AA-plus. First Boston Corp. sole managed the offering.
Korean Telecom late Wednesday issued $100 million of 7.40% notes due 1999 at par. The noncallable notes were priced to yeild 101 basis points over comparable Treasuries. Moody's rates the offering A1, while Standard & Poor's rates it A-plus. Salomon Brothers lead managed the offering.
Public Service Oklahoma issued $50 million of 7.375% first mortgage bonds due 2004. The noncallable bonds were priced at 99.858 to yield 7.393%, or 60 basis points over comparable Treasuries. Moody's rates the offering Aa2, while Standard & Poor's rates, it AA-minus. Morgan Stanley lead managed the offering.
Arkansas Power & Light late Wednesday issued a two-part first mortgage bond offering totaling $50 million. The first tranche consisted of $25 million of 7.90% bonds due 2002. Noncallable for five years, the bonds were priced at 99.314 to yield 8%, or 121 basis points over comparable Treasuries. The second consisted of $25 million of 8.70% bonds due 2022. Also noncallable five years, the bonds were price 99.672 to yield 8.73%, or 120 basis points over comparable Treasuries. Moody's rates the offering Baa2, while Standard & Poor's rates it BBB. Bear, Stearns & Co. lead managed the offering.
