International Business Machines Corp. plans to use most of the proceeds from yesterday's $1.65 billion two-part debt offering to help pay for a $1.7 billion refinancing the company announced last month.
IBM spokesman Rob Wilson said the company decided to issue now because of the historically low interest rates and because timing corresponds well to the October and November call dates of the debt issues being refinanced.
The first tranche of yesterday's offering consisted of $900 million of 6.375% notes due 1997. The noncallable notes were priced at 99.83 to yield 6.415% or 50 basis points over comparable Treasuries.
Part two consisted of $750 million of 7.250% notes due 2002. The noncallable notes were priced at 99.237 to yield 7.359% or 55 basis. points over comparable Treasuries. Moody's Investors Service rates the offering AA2. while Standard & Poor's Corp. rates it AAA. First Boston Corp. lead managed the offering, which was increased from $1.5 billion. Both tranches came at the higher end of price talk.
IBM's deal comes at a time when issuers appear to be laying low ahead of the November presidential election.
Since the last presidential debate, issuance has both fallen off and shifted toward the shorter maturities, according to Mike Bassett, a vice president at Stone & McCarthy Research Associates.
However, he added, "I think they're waiting, but I think there's more than the election."
In addition to the election, Bassett cited October unemployment figures, which come out on Nov. 6. and the Treasury refunding beginning Nov. 9.
"People just want to see [a] smaller number of uncertainties" before they come to market, he said.
But Bassett does not expect the market to be completely dead.
"I think they'll be people here and there who either need the money or want to get a play on scarcity," he said.
In other news yesterday, Pitney Bowes Credit Corp. filed a shelf registration with the Securities and Exchange Commission for up to $500 million of debt, Mary Maarbjerg, treasurer of the corporation, said. The registration brings the corporation's available shelf debt to $600 million, she said. She added that the company, a unit of Pitney Bowes Inc., has no specific plans for an offering.
Elswhere, Exide Corp. filed a registration statement with the SEC for 150 million of senior- unsecured notes due 2002 and $110 million principal amount of subordinate deferred coupon debentures due 2004.
The Reading, Pa.-based company will use proceeds to redeem all of its outstanding 12 7/8% senior subordinated notes due 1997. Exide will also use proceeds to buy back preferred stock and prepay some debt under its bank credit agreement, as well as for general corporate purposes including working capital.
Morgan Stanley & Co. and Alex. Brown & Sons Inc. will co-manage the offering.
Now issues
CIT Group issued $100 million of 5.50% notes due 1995. The noncallable notes were priced at 99.746 to yield 5.593% or 65 basis points over comparable Treasuries. Moody's rates the offering Al. while Standard & Poor's rates it A-plus. Morgan Stanley sole managed the offering.
Orange & Rockland Utilities issued $55 million of 6.50% debentures due 1997. The noncallable debentures were priced at 99.703 to yield 6.57% or 60 basis points over when-issued five-year Treasuries. Moody's rates the offering A3, while Standard & Poor's rates it A-plus. Smith Barney, Harris Upham & Co. lead managed the offering.
In secondary trading, investment-grade bonds ended unchanged to down 1/8 point. High-yield bonds ended mixed.
Yesterday's Ratings
Moody's downgraded Hershey Foods Corp.'s senior debt ratings to Aa3 from Aa2. The new rating is "more consistent with Hershey's apparent interest in international expansion by acquisition which would result in a more leveraged capital structure," a Moody's release says. "The company's increased appetite for acquisition has been demonstrated by the size of its recent unsuccessful $1.3 billion bid to acquire Freta Maribou A.S."
The rating agency confirms Hershey's Prime-1 commercial paper rating. The action concludes a review announced on Sept. 29, 1992.
