Corporate bond buyers dusted off old credit reports yesterday as a pair of "museum piece" industrial issuers locked in attractive 10-year financing.
First up was USX Corp., which offered $250 million of 10-year notes through Goldman, Sachs & Co.
The Pittsburgh-based steel and resources company had not tapped the market since 1986, when it was still U.S. Steel, according to Securities Data Co.
That scarcity value helped USX land a single-digit coupon despite its near junk-grade ratings, and enabled underwriters to increase the deal from an originally planned $200 million.
Goldman priced the noncallable securities as 9.80s at 99.807, giving them a risk premium of 150 basis points over Treasuriers.
"I think many people are full of a lot of other names, so the scarcity is one thing in its favor," said a New York-based trader. "And with the economy picking up, it's being a cyclical probably helped.'
Mary Anne Sudol, vice president at Fitch Investors Service, said, "the steel business is clearly influenced by the ups and downs in the economy. Their earnings are cyclical, but they're done a great job managing down their debt levels."
Although its leverage remains upward of 50%, USX has cut its debt load by more than $4.5 billion since 1986.
Fitch rates USX BBB.
USX filed a $1.5 billion 415 registration in May, saying it would draw on that shelf for general corporate purposes and debt retirement.
"We anticipate we'll have some debt offers to be made to refund some debt issues," a spokesman for the company said yesterday. USX's 1986 issue, which was priced with a 9% coupon by Salomon Brothers, comes due in 1992.
Next up was McCormick & Co., the Maryland-based specialty foods concern.
The company's $75 million issue, sold through a First Boston Corp. team, was off Securities Data's charts: McCormick had not ventured into the debt market since at least 1970, when Securities Data's records begin.
"This is essentially a new name," said Glenn Henricksen, portfolio manager at New York Life Insurance Co.
First Boston priced the noncallable offering as 8.95s at 99.496, for a yield 70 basis points more than the 10-year Treasury. That is about 10 basis points richer than an average A-rated industrial.
Moody's Investors Service rates McCormick A3; Standard & Poor's Corp. rates it A.
Bond buyers were apparently eager to stash away the McCormick paper, and underwriters reported the issue sold out quickly after pricing.
"I have not seen these guys trade in a long time," said John Ablin, portfolio manager at Eagle Investment Associates in Boston. "These issues have been put away.
"Because the curve has been so steep, a lot of issuers that would have gone out to the intermediate maturities have borrowed short," Mr. Ablin said. "Now that the market's not going anywhere, they're going out a little more."
Officials at McCormick did not return telephone calls yesterday.
Other "museum" credits said to be sniffing around the bond market include Castle & Cook and BF Goodrich & Co.
Elsewhere in the primary market, CIT Group Holdings Inc. yesterday offerd $150 million of six-year notes via Goldman Sachs. The noncallable securities were priced as 8.75s for a spread of 69 basis points to the interpolated five- and seven-year Treasuries.
Moody's rates the securities A1; Standard & Poor's Corp. rates them A-plus.
The light new-issue calendar brightened an otherwise dull day in the corporate market, where investment-grade and high-yield issues finished little changed.
Among winners in the junk bond market, Trump Castle bonds eked out 3/4-point gains after the New Jersey Casino Control Commission voted to allow Hilton Hotels to operate in Atlantic City.
The gains came even though Hilton Vice Chairman Gregory Dillon said the company was not in talks to acquire the Castle casino and the Trump Organization denied the property was for sale.