More than $400 million of demand yesterday greeted China International Trust and Investment Corp.'s $250 million offering -- the first U.S. bond offering by a Chinese entity since the Communists seized power in 1949.
The 10-year offering was priced to yield a spread of 100 basis points over comparable Treasuries. That was the lower end of price talk, which called for a spread of 100 to 110 basis points over. Treasuries, a source familiar with the deal said. The offering was increased from $150 million.
China International, which is 100% Chinese government-owned, makes long-term equity investments in projects such as power plants, the source said. It is designed to stimulate the economy and upgrade infrastructure, he said.
Robert Hickey, an assistant vice president and portfolio manager at Van Kampen Merritt Inc. in Chicago, noted the deal's success, but said he passed on it.
"I thought it was too fully priced at 100 over," Hickey said. He cited some Canadian provincial issues with equal or better ratings that are slightly cheaper. Hickey would have liked yesterday's offering to yield a spread of 110 to 115 over Treasuries.
Although the Communist issue alone would not cause Van Kampen to reject the offering, "we did have to figure that in," he said.
Hickey said Van Kampen liked the credit but did not think it was being paid enough for the "intangible risks" associated with the offering.
However, he said, "The story was good ... There's a lot of people out there who want to own China."
The source involved with the offering said the Communism issue caused few problems for the deal.
"The Communist nature of the country really didn't scare a lot of people away," he said.
Chinese International issued $250 million of 6.875% bonds due 2003. The noncallable bonds were priced at 99.706 to yield 6.916%, or 100 basis points over comparable Treasuries.
Moody's Investors Service rates the offering Baa1, while Standard & Poor's Corp. rates it BBB. Goldman, Sachs & Co. lead-managed the offering.
In secondary trading yesterday, high-grade issues were quiet and largely unchanged as participants eyed the Treasury market's $11 billion auction of five-year notes.
One high-grade trader noted tightening in some Commonwealth Edison Co. and Texas Utilities Co. issues.
High-yield issues yesterday ended 1/4 point lower over all, with steel issues down 1/2 to a point following the recent elimination of some steel import tariffs.
In other news, Wisconsin Electric Power Co. yesterday announced plans to buy back $60 million of 9 1/8% first mortgage bonds due Sept. 1, 2024, through a fixed spread tender offer.
"The company is purchasing the 9 1/8% series bonds as part of its continuing effort to reduce the average cost of its debt in the current low interest rate environment," a company release says.
The offer started yesterday and expires on Aug. 4 at 5 p.m. eastern standard time. Salomon Brothers will act as exclusive dealer manager for the offering.
Wisconsin Electric plans to finance the refunding with yesterday's sale of $60 million of 7.05% first mortgage bonds due Aug. 1, 2024. Salomon Brothers served as underwriter on the offering, which is scheduled to close on Aug. 11.
The utility offered the 7.05% bonds to the public at 97.100% of the principal amount to yield 7.287%. They are rated Aa2 by Moody's and AA-plus by Standard & Poor's.
Proceeds from the offering will be added to the company's general fund and used mainly for refunding the 9 1/8% bonds.
The tender price will be set each day based on a fixed spread of 15 basis points over the yield on the 4.25% U.S. Treasury note due Aug. 31, 1994.
New Issues
Gulf States Utilities issued a two-part first mortgage bond offering totaling $290 million. The first tranche consisted of $170 million of 6.410% bonds due 2001 at par. The noncallable bonds were priced to yield 67 basis points over the 7 7/8% Treasuries of 2001. The tranche was increased from $120 million.
The second piece consisted of $120 million of 6.770% bonds due 2005 at par. The noncallable bonds were priced to yield 87 basis points over 10-year Treasuries. The tranche was decreased million. Goldman, Sachs & Co. lead-managed the offering.
Federal Home Loan Mortgage Corp. issued $250 million of debentures due 1995 at par. Noncallable for a year, the debentures for the first year float weekly at 20 basis points over three-month Treasuries. They pay quarterly. After the first year they become fixed rate with a 4.625% coupon. Goldman Sachs sole-managed the offering.
Bear Steams Cos. issued $200 million of 6.70% notes due 2003. The noncallable notes were priced at 99.511 to yield 6.768% or 88 basis points over comparable Treasuries. Moody's rates the offering A2, while Standard & Poor's rates it A. Bear, Stearns & Co. lead-managed the offering.
First Colony Corp. issued $175 million of 6.625% senior notes due 2003. The noncallable notes were priced at 99.89 to yield 6.64% or 75 basis points over comparable Treasuries. Moody's rates the offering A2, while Standard & Poor's rates it A-plus. First Boston Corp. lead-managed the offering.
Monsanto issued $150 million of 6% notes due 2000 at par. The noncallable notes were priced to yield 47 basis points over comparable Treasuries. Moody's rates the offering A 1, while Standard & Poor's rates it A. Merrill Lynch & Co. lead-managed the offering.
Arkansas Power & Light issued $115 million of first mortgage bonds due 2005. Noncallable for five years. the notes were priced at 98.443 to yield 6.842% or 92 basis points over comparable Treasuries. Moody's rates the offering Baa2, while Standard & Poor's rates it BBB. Kidder Peabody & Co. won competitive bidding to underwrite the offering.
Rating News
Moody's has given a B1 debt rating to National Gypsum Co.'s $100 million of 10% notes due 2003.
The notes were issued as part of a recently completed bankruptcy protection plan.
"The rating reflects the company's position as the second-largest domestic producer of gypsum wallboard, its significantly reduced debt levels as a result of its reorganization, and the resolution of a substantial portion of its asbestos problems," a Moody's release says.
