Analysts said the negative outlook on Bankers Trust New York Corp. from Moody's Investors Services presents a buying opportunity for investors.

The first trading day after Moody's revised its long-term outlook on the company's debt rating to negative from stable, demand for the traded bonds weakened, while the spread between the bonds and treasuries widened by about five basis points.

The wider spread means savvy investors can buy the bonds at a cheaper rate, gaining in the long term as the bank strengthens, analysts said.

"I am a believer in this story over time," said Jean I. Sievert, a bank bond analyst at Chase Securities Inc. "To the extent that I thought it was interesting before, it's even more interesting now."

Some analysts expected the bank to report stronger earnings on Thursday, following J.P. Morgan & Co.'s improved trading results.

"We have been telling people to be buyers," said Jay Weintraub, a bank bond analyst at Merrill Lynch. "I think it should be a good trading quarter" for Bankers Trust.

Moody's changed the outlook on Bankers Trust, Bankers Trust Co., and BT Securities to "negative" from "stable" last Friday.

The revised outlook, which represents a longer-term perspective on the company's debt ratings, comes soon after Proctor & Gamble amended its lawsuit over Bankers Trust's sales practices, adding a Racketeering Influenced and Corrupt Organizations Act charge that could result in triple damages.

Moody's said that it plans to monitor the situation closely to determine whether the developments might further damage Banker's franchise value.

"The franchise makes a difference," said Katy Rossow, a bank bond analyst at Furman Selz. She said reputation in the marketplace is particularly important for banks like J.P. Morgan and Bankers Trust, which are actively involved in these trading businesses.

Investors required a greater premium from Bankers Trust's bond on Monday, causing the bonds to weaken by approximately 5 basis points.

Investors are demanding a premium because of the "headline risk," said Ethan M. Heisler, a bank bond analyst at Salomon Brothers Inc.

Some analysts said negative publicity will continue to create a discount in the market for the bank's bonds.


NEW YORK - First Union Corp. came to market with $250 million in 40-year debt with a 10-year put option.

Analysts said First Union's latest issue may reflect an attempt to raise its capital ratios. Total capital at the Charlotte, N.C.-based bank slipped to 10.7% at the end of the third quarter, down from 11.7% at the end of the second.

Additionally, tier 1 capital decreased to 6.9% from 6.3%.

"They are not awash in capital," said Chase Securities' Ms. Sievert.

Investors Monday demanded a higher premium for the oustanding bonds traded at First Union.

Analysts said the market move signaled a potential concern with First Union's need to replenish its capital base or fund a purchase of some portion of the Prudential Insurance Company of America.

Either way, the market is anticipating further debt issuance, said analysts, which usually causes investors to demand greater return.

"If First Union pays a premium for Prudential, they will need money to do it," said a bank bond analyst.

Analysts said the continued use of the put option in First Union's debt issue reflects the belief that long bond rates are at or near bottom.

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