Chiquita Brands International Inc. and Clark Oil & Refining Corp. together fed the high-yield market $475 million of new debt yesterday.
"Boy, things have changed a lot," one buyside source said, noting the 9.80% yield on Chiquita's offering. "I used t think we wouldn't get a bond with 10% for a long time."
The source added, however, that Chiquita was "one of the more likely credits to come inside 10%."
Another high-yield source added, "It should be attractive to the investment crossover buyers."
By conservative estimate, the second source believes Chiquita could become an investment-grade credit within 12 to 18 months.
The company issued $250 million of 9.625% senior debentures due 2004. The noncallable debentures were priced at 98.753% to yield 236 basis points over 10-year Treausries. Moody's Investors Service rates the debentures Bal, while Standard & Poor's Corp. rates them BB-plus. Lehman won the right to underwrite the offering through competitive bidding.
Clark originally went drilling for $200 million but increased the figure to $225 million following strong investor demand. The senior notes carried a 10 1/2% coupon.
"That [coupon] was the lower end of our assumption," said Donald H. Nonnenkamp, the company's treasurer. "We were pleased with the rate and the market acceptance of the deal."
Clark's senior note due 2001 were priced at par and callable after five years, Moody's Investors Service rates the offering Ba2, while Standard & Poor's Corp. rates it BB. Goldman, Sachs & Co. lead managed the offering.
The deal originally consisted of fixed and floating rate tranches at $100 million each, but the company found stronger demand for the fixed-rate portion and decided to structure the whole deal that way, Mr. Nonnenkamp said.
Clark will use proceeds to retire floating-rate notes due 1994 and to pre-fund a capital expenditure program it must undertake to comply with the Clean Air Act, he said.
In other high-yield news, price talk on Magnetek Inc.'s $125 million offering was at about 10 3/4%. That deal, along with Stone Container Corp.'s $240 million offering, is also expected this week.
Over all, the high-yield market was down about 3/8 point to 1/2 point in what one trader called "indecisive" trading. The high-grade market traded slightly with Treasuries, about an 1/8 point, with little activity.
Associates Corp. of North America issued $300 million of 6.625% notes due 1994. The noncallable notes were priced at par to yield 80 basis points over comparable Treasuries. Moody's rates the offering Al, while Standard & Poor's rates it AA-minus. Bear, Stearns & Co. sole managed the offering.
Federal National Mortgage Association issued $250 million of 7.8% medium-term notes due 2001. Noncallable for three years, the notes were priced at 99 27/32 to yield 7.83% or 40 basis points over comparable Treasuries. Lehman managed the offering.
Cooper Tire & Rubber Co. filed a shelf registration with the Securities and Exchange Commission to issue up to $200 million of debt securities that may include warrants to purchase debt securities, a company official said. Cooper plans to use proceeds for working capital to repay existing debt and for general corporate purposes. Merrill Lynch & Co. has been named underwriter.
In yesterday's rating actions, Standard & Poor's affirmed Winterthur Swiss Insurance Co.'s AAA claims-paying ability. The affirmation reflects the company's "leading position in the Swiss market; its ability to generate strong, stable earnings; and a large degree of financial flexibility stemming from conservative use of reinsurance and conservative accounting practices," the agency said.