NationsBank Corp. plans to come to market today with about $1.4 billion in subordinated debt to finance its acquisition of Boatmen's Bancshares.
The noncallable issue is in three tranches:
*$500 million in five-year subordinated debt;
*$500 million to $550 million in 10-year subordinated debt;
*$350 million in 20-year subordinated debt.
One trader estimated that NationsBank would pay roughly 45 basis points over comparable Treasuries on the five-year tranche, a 65-basis point spread or more on the 10-year tranche, and about 65 basis points on the 20- year portion.
Analysts said the proceeds will be used for the cash portion of the merger and, possibly, to replace maturing debt issues.
The deal is worth $8.85 billion at Wednesday's share prices. Boatmen's shareholders have the option of receiving cash for up to 40% of their shares.
Analysts said NationsBank - a frequent issuer of bank debt - decided to issue several tranches to broaden the market for the debt. The analysts say they expect a receptive market, although some noted that the market already has a good supply of NationsBank debt and bank debt in general.
According to Securities Data Corp., banks have issued a healthy $1.8 billion of corporate paper this month.
"There is a lot of paper in the market. NationsBank is not a new name, but investors have a lot of money and have been on the sidelines, so they are looking for opportunities," said bank bond analyst Ethan Heisler of Salomon Brothers Inc.
Lead underwriters were NationsBanc Capital Markets Inc. and Chase Securities Inc.
First National Bank of Boston, a subsidiary of Bank of Boston Corp., came to market Monday with $200 million in 10-year subordinated debt.
The issue was priced at 65 basis points over comparable Treasuries.
Morgan Stanley is lead underwriter.
Bank bond analyst Katharine Rossow of Chase Securities said banks are taking advantage of favorable interest rates. "People are worried that in the near-term, about the Fed raising interest rates," she said.