The high-grade market will welcome Philadelphia Electric Co.'s $475 million offering Monday, as heavy new-junk volume continues next week.
Philadelphia Electric plans to sell $225 million of 31-year first and refunding mortgage bonds through competitive bidding at 10:30 a.m., a spokesman for the utility said.
At 11 a.m., Philadelphia Electric will sell $250 million of eight-year first and refunding mortgage bonds, also through competitive bidding.
"Obviously, rates are good," the spokesman said.
Philadelphia Electric chose the eight- and 31-year durations because they fit well with its maturity schedule.
"We establish a bogey of X million a year for a maturity, and we're under that bogey for the eight-year, 2001," the spokesman said. He noted that already this year, Philadelphia Electric has sold $550 million of 30-year debt.
The company will announce what proceeds will be used for on Monday.
In the junk area, Merrill Lynch & Co. is seen bringing at least four deals next week. It is sole manager on Cencall Communications' $175 million of senior discount notes due 2003, Rykoff-Sexton's $130 million of senior subordinated notes due 2003, and Eckerd Corp.'s $100 million of senior subordinated notes due 2003. Merrill also will be lead manager on Aim Management Group's $100 million of senior secured notes due 2003.
Rykoff-Sexton's deal is expected as early as Monday.
Also a possibility for next week is Armco Inc.'s $100 million of senior notes through Salomon Brothers. Goldman, Sachs & Co. is expected to bring $150 million of senior guaranteed notes due 2003. Another possibility is a Sheffield Steel deal through Lehman Brothers. The company is listed on one calendar as offering $75 million of senior notes due 2001.
In other news, Dennis M. Bushe, chief investment strategist for Prudential Securities' fixed-income funds, said junk bonds will continue to be an attractive asset class next year.
Bushe, whose comments came at a 1994 forecast breakfast Prudential sponsored yesterday, sees the economy continuing to grow at a slow but steady pace. That steady growth will help strengthen high-yield companies, he said.
In addition, the amount of yield those bonds offer will provide a sufficient cushion for any correction in the bond market, he said.
In secondary trading, spreads on investment-grade issues tightened slightly given the Treasury market's sell-off. High-yield issues ended mostly unchanged. Among movers were Owens Illinois' 11% debt, which gained 1/2 point to 115 1/2, and Stone Container Corp.'s 11 7/8% debt due 1998, which lost 1 1/2 points to end at 95.
Federal Home Loan Mortgage Corp. issued $275 million of $5.40% debentures due 2000 at par. Noncallable for three years, the debentures were priced to yield 53 basis points more than comparable Treasuries. Morgan Stanley & Co. was lead manager of the offering.
Cyprus Minerals Co. issued $250 million of 6 5/8% notes due 2005. The noncallable bonds were priced at 99.392 to yield. 6.70%, or 140 basis points more than comparable Treasuries. Moody's Investors Service rates the offering Baa2, while Standard & Poor's Corp. rates it BBB. Kidder, Peabody & Co. was lead manager of the offering.
Dean Witter, Discover & Co. issued $250 million of 6 3/4% debentures due 2013. The noncallable debentures were priced at 99.346 to yield 6.81% or 75 basis points more than the 7 1/8% Treasuries of February 2023. Moody's rates the offering A3, while Standard & Poor's rates it A. Fitch Investors Service Inc. rates the offering A-plus. Dean Witter Reynolds Inc. was lead manager of the offering.
Federal National Mortgage Association issued $200 million of 4.47% step-up notes due 1998 at par. Noncallable for two years, the notes were priced to yield 57 basis points more than two-year Treasuries. After two years, the coupon steps up to 5.47%, for a yield of 75 basis points more than five-year Treasuries. Lehman Brothers managed the offering.
Federal Home Loan Banks issued $145 million of 4.96% notes due 1998 at par. Noncallable for a year, the notes were priced to yield 22 basis points more than comparable Treasuries. Citicorp Securities Inc. managed the offering.
Hechinger issued $100 million of 6.95% notes due 2003. The noncallable notes were priced at 99.715 to yield 6.99% or 166 basis points more than comparable Treasuries. Moody's rates the offering Baa3, while Standard & Poor's rates it BBB. Morgan Stanley was sole manager of the offering.