NationsBank Corp. continues to be the most active issuer of bonds in the industry, with its second offering in a month, $300 million of three- year floating-rate notes.
The notes are noncallable and will pay 15 basis points over the three- month London interbank offered rate. The issue has received a single-A rating from Standard & Poor's Ratings Group and an A-plus rating from Duff & Phelps Credit Rating Co.
Analysts expect that these notes and $250 million of two-year fixed notes will help refinance about $1.3 billion in maturing debt.
"NationsBank has been the most active among the banks," said James E. Moss, a credit analyst at Duff & Phelps. "Their refinancing need is definitely driving part of that."
Mr. Moss said that his A-plus rating reflects the company's improved ability to achieve consistent quality earnings through all phases of a business cycle. Mr. Moss pointed to the recent acquisitions of some nonbank businesses that would help the company diversify its earnings.
The bank is focusing on building its mortgage servicing business, with the acquisition of units of Keycorp in Buffalo and Source One in Michigan this year.
"As they add these nontraditional bank lines of business, you'll see benchmarks such as core deposits as a percent of assets come down," said Mr. Moss. "On the positive side, the bank is building a more diverse organization geographically and by business line."
Mr. Moss said that the short-term assumption of debt is more than compensated for by the longer-term diversification of the bank's business.
Analysts said that up until about two months ago, banks had issued fixed-rate bonds, and had swapped them to floating rates. Now, however, attractive pricing in the floating-rate arena has created better opportunities.
Joseph Labriola, a fixed-income analyst at Deutsche Bank Securities Corp., said NationsBank's floating-rate issuance reflects current demands in the marketplace.
The current price for a fixed-rate three-year note for NationsBank would be about 48 basis points, said Mr. Labriola. The spread would tighten by 24 basis points in a swap to a floating-rate note, which would make the swap- adjusted price from a fixed issuance Libor plus 24.
"It doesn't make sense to issue at a fixed rate at Libor plus 24 if you can do it at Libor plus 15 as a floating rate," said Mr. Labriola.
