A Manhattan federal grand jury yesterday indicted Patricia Ostrander, a former portfolio manager for Fidelity Investments, on three counts of securities laws violations.
The three-count indictment charged Ms. Ostrander with taking unlawful compensation from now-defunct Drexel Burnham Lambert Inc. related to her purchases of securities for Fidelity customers, according to a release from the office of the United States Attorney for the Southern District of New York.
Ms. Ostrander is thought to have been compensated by Drexel in 1986 with a limited partnership interests in MacPherson Investment Partners, a violation of the Investment Company Act of 1940 and federal law on pension plan management. The indictment also charges that she failed to report her investment to Fidelity as federal regulation requires.
As portfolio manager of several Fidelity mutual funds and pension plan investments during the 1980s, Ms. Ostrander allegedly bought and sold hundreds of millions of dollars of junk bonds for Fidelity customers through Drrexel.
The indictment also charges that she bought millions of dollars of debt and preferred securities for Fidelity's customers through Drexel in connection with Storer Communications Inc. leveraged buyout, which Drexel underwrote in 1985. The indictment says that in approximately January 1986, she and other investors received interests in MacPherson for a nominal price.
MacPherson was a limited partnership that held warrants to purchase common stock of a company called SCI Holdings Inc., the company set up to acquire Storer. The MacPherson interests represented valuable compensation to Ms. Ostrander, which she failed to make know to Fidelity, the indictment said.
Ms. Ostrander, 53, is charged with one count of accepting unlawful compensation which carries a maximum penalty of five years imprisonment or $250,000 in fines or both. She also was charged with one count of receiving a thing of value in connection with a pension plan investment, a charge carrying a maximum penalty of three years or $250,000 or both and one count of failure to report a securities transaction which calls for a maximum five-year term or a $250,000 fine or both.
The Tennessee Valley Authority's $500 million offering scheduled for next week will mark the agency's first competitive bid offering since 1974, Bill Malec, its chief financial officer, said yesterday.
"Because it's been so long since one has been done, I think the Street is still trying to figure out what kind of syndicates might form," Mr. Malec said.
"We have probably received 50 calls from the Street," Mr. Malec said, adding that "virtually every firm on the Street" has expressed interest.
Calls to several investment banking firms were not returned yesterday.
Proceeds from the 10-year deal will go to refinance $500 million of 9.195$ power bonds issued in 1979, he said. Assuming interest rates hold at current levels, the agency expects to save more than $2 million in interest costs annually with the new issue. That savings would become effective immediately after TVA receives the funds, he added.
"So we decided to pull the trigger," Mr. Malec said.
The agency is currently soliciting bids due Oct. 16 and will accept the bid that offers the net lowest cost, he said. The offering will be made the same day.
Between 1974 and 1989, the TVA borrowed all of its funds from a federal entity called Federal Financing Bank, Mr. Malec said, explaining that borrowing from that bank proved the cheapest way to raise funds at the time. Then, in 1989, the TVA issued $8 billion of securities publicly to refinance the high-cost debt it borrowed from the Federal Financing Bank.
That $8 billion was done through a preordained underwriting syndicate because of its large size, its more complex structure, and the fact that the TVA had not done a public offering in 15 years.
"So the negotiated process served us very well," he said.
The smaller, more "plain vanilla" $500 million deat at a 10-year maturity lends itself better to a competitive bidding process than the larger $8 billion offering, Mr. Malec said.
"The market knows us better," he explained.
The TVA is a federal agency much like the Federal National Mortgage Association, Mr. Malec said. The nation's largest electrical company, it serves a seven-state area. Its mission includes economic development, flood control, and electrical power.
High-grades yesterday were unchanged to off 1/8 point. The high-yield market opened with a strong tone but faded later in the day in line with equities and Treasuries. Goldman, Sachs & Co.'s high-yield investors conference also helped to quiet the market late in the day.
Among yesterday's high-grade issuers was NCNB Corp., which issued $300 million of 9 1/8 subordinated noted due 2001 and priced at 99.560 to yield 9.913 or 165 basis points over Treasuries. Merrill Lynch managed the offering, which was increased from $250 million. Moody's rates the issue A-3, while Standard & Poor's rates it A-minus.
Also yesterday, Fireman's Fund Mortgage Corp. offered $160 million of 10-year, 8 7/8% notes priced at 99.960 to yield 8.881 or 135 basis points over Treasuries. Moody's rates the deal A-3, while Standard & Poor's rates it A-plus.
In rating actions yesterday, Standard & Poor's placed Bowater Inc.'s existing A ratings for its senior debt and preferred stock on Creditwatch for a possible downgrade. The move affects some $400 million of securities. The agency also placed the Darien, Conn.-based firm's A1 commercial paper rating under review, again for a possible downgrade.
The action reflects the firm's recently announced plans to purchase Georgia-Pacific Corp.'s Millinocket, Me., properties for about $320 million.
"The purchase, along with the possibility of significant additional capital investment, is likely to increase Bowater's level of financial risk," the release said. Standard & Poor's plans to meet with management and review the rating once the firm completes the purchase.
Elsewhere, the rating agency upgraded Warnaco Inc.'s $83 million senior discount noted due 1992 to B from B-minus. The agency also raised the ratings on Warnaco Group Inc.'s $155 million of senior subordinated due 1996 and $90 million of subordinated debentures due 1998 to B-minus from CCC-plus.
The agency removed all ratings from CreditWatch, where they were placed with positive implications on Sept. 10 pending completion of Warnaco Group's proposed public equity offering.
In other rating actions, Duff & Phelps/MCM Investment Research Co. yesterday assigned an A rating to MDU Resources Group Inc.'s proposed new issue of $20 million of first mortgage bonds. MDU Resources will use proceeds from the sale of the 9 1/8% series due Oct. 1, 2016 for general corporate purposes, including possible redemption of its 10 1/4% first mortgage bonds due May 15, 2004.
Also yesterday, the agency assigned a AA rating to Indianapolis Power & Light's proposed $58.8 million new issue of first mortgage bonds. The company is issuing the bonds from a $142 million first mortgage bonds shelf registration, also rated AA. It will use proceeds to redeem debt.