New junk deals totaled more than $1.6 billion last week, and most of them traded up in the aftermarket, high-yield sources said Friday.
Kingman D. Penniman, an executive vice president at Duff & Phelps Corp., described last week's volume as a "good week," particularly based on the number of deals -- at least 12 -- that arrived.
"There was a lot of cash willing to be put to work, so I think it was a good week for issues to come and be accepted," Penniman said.
The inflow of cash meant that some issuers were able to price deals 25 basis points richer than they would have been able to otherwise, Penniman said. Most deals came at the lower end of price talk, he said.
"I think some of them were priced aggressively," Penniman said.
However, despite the aggressiveness, the deals are trading at a premium, which is a good indication of the market's strength.
The cash is coming not just from the high-yield mutual funds but also from other sources, including pension funds and insurance companies, Penniman said. The market is witnessing a sector shift with those that exited the high-yield market returning now, he said.
Concern over a money exodus from the high-yield market led some investors last month to pull out because they feared prices would fall, Penniman said. They returned when they realized the situation had stabilized, he said.
Of last week's deals, Penniman said he liked Valcor's $100 million of 9.625% notes due 2003, but thought Eckerd Corp's $200 million of senior subordinated notes due 2004 were priced too richly. That deal, however, was increased from $100 million.
Kevin Mathews, a high-yield portfolio manager at Van Kampen Merritt Inc., said of last week's deals, "We bought some of them but not all of them. Some looked good; some didn't."
Like Penniman, Mathews said the deals traded up in the secondary market.
"Everything seemed to do well, but nothing seemed to trade up points," Mathews said.
In other news Friday, General Motors Acceptance Corp. said it will redeem on Nov. 30 all of its 8 1/4% debentures due Nov. 15, 2006.
GM will redeem the $250 million of debentures at 102.65% of principal amount plus accrued interest, according to a GMAC release.
The securities were sold in November 1977, and all of the $250 million are outstanding. The debentures may be surrendered for payment to Morgan Guaranty Trust Company of New York.
In secondary activity, spreads on high-grade issues were unchanged. Junk prices were up slightly in moderate trading.
Ford Motor Credit issued $300 million in 6 3/8% notes due 2008. The noncallable notes were priced at 99.952 to yield 6.38%, or 98 basis points more than 10-year treasuries. Moody's Investors Service rates the offering A2, while Standard & Poor's Corp. rates it A. Goldman, Sachs & Co. was lead manager.
Banco de Galicia y Buenos Aires S.A. sold $200 million of 9% negotiable obligations due 2003. Noncallable for five years, the securities were priced at 99.542 to yield 9.07% or 365 basis points more than comparable Treasuries. Moody's rates the offering B1, while Standard & Poor's rates it BB-minus. Goldman Sachs managed the offering.
Valcor Inc. came to market with $100 million of 9.625% senior notes due 2003 at par. The notes are callable after five years beginning at 104.813, moving down to 102.406, and then to par. The company can call up to 35% of the offering in the third year if it does an initial public offering. Moody's rates the notes B1, while Standard & Poor's rates them B. Morgan Stanley & Co. was lead manager.
Standard & Poor's gave a B rating to Coca-Cola Bottling Group [Southwest] Inc.'s $140 million of senior subordinated notes due 2003. The rating agency also assigned a B rating to 49%-owned affiliate Texas Bottling Group Inc.'s $125 million of senior subordinated notes due 2003.
Proceeds will be used to refinance debt, Standard & Poor's said in a release. Both bottlers' have implied senior ratings of BB-minus.
"Ratings on CCBG and TGB reflect their combined, relative importance to the Coke and Dr Pepper soft drink distribution networks, as the number six Coke and number five Dr Pepper domestic bottler, respectively, offset their highly leveraged balanced sheets, resulting from a series of acquisitions in the Texas area and their private ownership," Standard & Poor's said in a release.