North Atlantic Energy Corp.'s $355 million offering tops this week's possible junk menu, which includes deals by a drug store chain, a aircraft brake manufacturer, an insurer, and a movie theater operator.
"It's a mixed bag," one high-yield portfolio manager said yesterday, adding that most of the contents appear solid.
"There's nothing that I can really slam," he said. "It's either okay or good."
Still, those companies will surrender a bit more yield than issuers earlier this year, the portfolio manager said.
Though buyers still hunger for junk, the previous new-issue parade lessened investor appetite somewhat, he said. Double-B credits these days are being priced closer to 11% than 10%, he said.
North Atlantic today is expected to price $355 million of first mortgage bonds due 2002 through Morgan, Stanley & Co. The 10-year debentures, which come with a sinking fund, have a 7.6-year average life.
Another issuer, Hook-SupeRx Inc., Friday increased its junk bond offering to $145 million from $125 million after reducing price talk on a related stock deal, a company spokesman said yesterday.
Price talk on Hook-SupeRx's $145 million of senior notes due 2002 is 10% to 10-1/4%. Goldman, Sachs & Co. is sole managing that offering, he said.
A Goldman Sachs spokesman said the equity offering is expected to be priced today.
Interest in the drug store chain's note offering exceeded interest in its stock deal, the company spokesman said. Hook-SuperRx lowered price talk on its 9.5 million shares to $13 to $15 a share from $15 to $17, he said. The stock offering, which consists of 7.9 million primary and 1.6 million secondary shares, is being managed by Goldman Sachs and Salomon Brothers Inc.
Also on deck for this week is a $100 million 10-year senior subordinate notes offering by Leucadia National Corp. through Jefferies & Co. Price talk on the insurance company's notes is 10-1/2% to 10-3/4%. Moody's Investors Service rates the potential offering Ba3 while Standard & Poor's Corp. rates it BB-plus. A source familiar with the offering said it will be priced as soon as the Securities and Exchange Commission approves it.
Aircraft brake manufacturer K&F Industries is expected to issue $100 million of senior secured notes due 2003. Price talk on the offering is in the 11-3/4% area. Lehman Brothers will manage the offering.
Cinemark USA Inc. is expected to offer $125 million of senior notes due 2002. Noncallable for five years, the movie theater operator's notes are rated B1 by Moody's and B-plus by Standard & Poor's. Bear, Stearns & Co. will manage the offering. Price talk on the offering is 11-1/2% to 11-3/4%, a source familiar with the offering said.
Best Performers
Though they won't match their stupendous gains of last year, high-yield bond funds are again the bond market's best-performing segment so far this year, according to a report issued yesterday by Mutual Fund News Service.
High-yield funds posted a return of almost 9% for the first four months, the report says. Volatility has also dropped to its lowest level in more than two years, it said, making the bonds appeal to even conservative long-term investors.
Yesterday's Markets
In secondary trading yesterday high-grade bond prices finished quiet and unchanged. One high-grade trader stated a $2 billion shelf registration by E.I. du Pont de Nemours & Co. No one at the company was available for comment. High-yield bonds also finished unchanged, though the Treasury market's troubles caused some shake-up in the top tier. The Treasury's 30-year bond lost 5/8.
Chemical Banking Co. issued $100 million of floating rate notes due 1995. The noncallable notes were priced at 99.85. They float quarterly at 35 basis points over the London Interbank Offered Rate and pay quarterly. Lehman Brothers managed the offering
Yesterday's Ratings
Standard & Poor's has downgraded the province of Saskatchewan's long-term debt to BBB-plus from A-minus, and has removed it from CreditWatch where it was placed on Nov. 26. The action affects about $2.3 billion of rated debt.
"The adjustment reflects the province's high debt burden, budgetary pressures stemming in part from past unsuccessful off-budget investment projects, and the difficulties inherent in adhering to a deficit reduction plan in a resource-dependent economy," Standard & Poor's release said. "While the New Democratic Party government is strongly committed to deficit reduction, as evidenced by the measures taken in the current budget year, increasingly difficult choices may have to be made to sustain this effort," the release said.
