Long Island Lighting Co.'s expected $451 million offering today should help it put $446 million of bank debt to rest.
Lilco's 30-year debentures are expected to be noncallable for 10 years. Price talk is 140 to 145 basis points over comparable Treasuries, sources familiar with the offering said.
"I think it's probably fair," one buy-side source said yesterday. "Lilco paper has come under somewhat of a cloud recently. I'm not sure why."
Some of that pressure may have stemmed from fears that Lilco may do more financing, the source said.
Lehman Brothers will lead-manage the offering with help from Chase Securities Inc. and Citicorp Securities Markets Inc.
The Chase Manhattan Bank and Citibank are two major banks involved in the $446 million term loan, a source familiar with the deal said. So far this year, lower rates have prompted Lilco to refinance more than $1 billion of secured and unsecured debt and preferred stock, he said.
The buy-side source added, however, that investors are still smarting from Marriott Corp.'s decision to split into two companies.
"I don't think the corporate market has yet recovered from the Marriott situation," she said. She cited Westinghouse Electric Corp. and ITT Corp. as two companies whose bonds have come under pressure from fears they might take a similar path. Spokesmen from both companies have strongly denied any thoughts of such a plan.
In secondary trading yesterday, high-grade bonds added 1/4 point with spreads to Treasuries remaining fairly firm, traders said.
High-yield bonds gained a 1/2 point.
"They were too cheap," one trader said. The better-than-expected third-quarter gross domestic product number, which rose 2.7%, also helped cyclicals, he added.
In other high-yield news, Gaylord Container Corp. said the appeal of a bankruptcy court's confirmation of its restructuring plan by a small group of its bondholders was "without merit."
The notice of appeal was filed by the same bondholders who previously sued the company and whose objection to the plan's confirmation was overruled at the confirmation hearing. Those bondholders represent one-10th of 1% of the company's subordinated holders. The hearing was held on Oct. 16.
Gaylord said it was unsure whether the appeal would affect consummation of the prepackaged plan, scheduled for Nov. 2.
Texas Utilities issued a two-part first mortgage bond offering totaling $300 million. The first tranche consisted of $100 million of 7.375% bonds due 1999 at par. The noncallable bonds were priced at 99.918 to yield 7.39% or 105 basis points over comparable Treasuries. The second tranche consisted of $200 million of 8.750% bonds due 2022.
Noncallable for 10 years, the bonds were priced at 99.261 to yield 8.82% or 122 basis points over comparable Treasuries. Moody's Investors Service rates the offering Baa2, while Standard & Poor's Corp. rates it BBB. Morgan Stanley & Co. lead-managed the offering.
Digital Equipment Corp. issued $250 million of 8.625% notes due 2012. The noncallable notes were priced at 99.106 to yield 8.72% or 110 basis points over 20-year treasuries. Moody's rates the offering A2, while Standard & Poor's rates it A-plus. Lehman Brothers lead-managed the offering.
Society National Bank issued $200 million of 7.85% subordinated notes due 2002. The noncallable notes were priced at 99.90 to yield 7.865% or 110 basis points over comparable Treasuries. Moody's rates the offering A3, while Standard & Poor's rates it A-minus. Goldman, Sachs & Co. lead-managed the offering.
Procter & Gamble Co. issued $150 million of 5.20% notes due 1995. The noncallable notes were priced at 99.92 to yield 5.229% or 45 basis points over comparable Treasuries. Moody's rates the offering Aa2, while Standard Poor's rates it AA. Goldman Sachs managed the offering.
Staples Inc. issued $100 million of 5% convertible subordinated debentures due 1999 at par. Noncallable for two years, the debentures convert into Staples common stock at $45 a share, a 24% conversion premium over Monday's closing stock price. Moody's rates the offering B1, while Standard & Poor's rates it B. Donaldson, Lufkin & Jenrette Securities Corp. and Alex. Brown & Sons Inc. managed the offering.
Tampa Electric issued $75 million of 7.750% first-mortgage bonds due 2022. Noncallable for 10 years, the bonds were priced at 95.163 to yield 8.185% or 157 basis points over comparable Treasuries. Moody's rates the offering Aa1, while Standard & Poor's rates it AA. A group lead by Chase won competitive bidding to underwrite the offering.
Laclede Gas Co. issued $40 million of 7.50% first mortgage bonds due 2007. The noncallable bonds were priced at 99.21 to yield 7.589% or 80 basis points over 10-year Treasuries. Moody's rates the offer Aa3, while Standard & Poor's rates it AA-minus. PaineWebber Inc. won competitive bidding to underwrite the offering.