High-yield investors, whose numbers seem to grow daily, are finally seeing a supply of new, larger bond issues.
This week, commercial banks were expected to bring to market within a few days at least five junk deals, most larger than $100 million. The plans come as the entire high-yield market has heated up, and investment banks had at least three other large junk deals on tap.
The securities unit of Chase Manhattan Corp. will bring to market a $500 million bond issue for Revlon in the next few days, as well as a $100 million issue for Lomak Petroleum.
At the same time, Bankers Trust New York Corp. was set to lead a $200 million bond for Ionica and a $200 million deal for Tracor. And Canadian Imperial Bank of Commerce this week led a $110 million transaction for Booth Creek.
High-yield investors welcomed the influx of larger deals.
"Up until two weeks ago, the majority of deals were $100 million," said Thomas Price, an analyst at Strong Capital Management. "Now, we're seeing more deals at $200 million or more."
Even with the gradual increase in deal size, investors are finding it difficult to obtain sizable portions of attractive transactions.
"It's tough to get the allocation you're looking for, unless it's a tough deal to get done," said Mr. Price.
During the week of Feb. 16, mutual fund investors poured as much as $300 million into high-yield funds, said experts. In late January, the pool of capital available for high-yield bonds grew by $750 million, industry observers said.
"We're running at a pace that's ahead of last year, and last year was a terrific year," said Jay Braden, a managing director in charge of high- yield origination at First Union Corp. "The technicals in the market are extremely strong."
In some cases, it's also difficult to find the kinds of yields that junk bond investors typically covet.
Indeed, the Bankers Trust-led deal for Tracor, an Austin, Tex., defense contractor, was expected to be priced at 200 basis points over the 10-year Treasury bond. That would amount to less than an 8.5% yield.
Nonetheless, the Tracor transaction was attracting strong interest among investors and was expected to be increased by $50 million, to $250 million.
"The current market remains strong," said Mr. Price.