Republic New York Corp. startled the capital markets last week by issuing $250 million in 100-year subordinated debt.

It was the first time a domestic U.S. bank has issued a security with such a maturity.

The only other banking company to have issued a "century bond" was Dutch giant ABN Amro in 1993.

Century bonds have historically been issued by industrial companies such as Disney Co., International Business Machines, and Chrysler Corp., which issued $500 million of century bonds one week ago.

However, Republic, a $52 billion-asset company, is no stranger to longer-term debt securities. It was among the first banks to issue 30-year subordinated debt six to seven years ago, analysts said.

"We have never been the kind of company to wait until it was absolutely necessary to issue," Thomas F. Robards, Republic's chief financial officer, said on Friday.

Mr. Robards said that the company issued the securities because it was an opportunistic moment to do so.

"It is not like we have a big need for capital," Mr. Robards said, "but we found that there was an opportunity to raise subordinated debt at an attractive level."

Indeed, the 100-year bonds are priced off of the 30-year Treasuries, whose yield last week reached the lowest level since the beginning of the year.

Republic also issued the debt to eventually replace more expensive subordinated debt that is expected to expire in the next five years.

Capital market experts also noted that Republic's cost of issuing the debt is relatively inexpensive.

One analyst pointed out that the Republic issue is priced at 76 basis points over Treasuries, 12-year subordinated debt trades at 74 basis points.

Republic has no plans of issuing more of the century bonds in the future, said Mr. Robards,

However, Frederick Khedouri, head of Bear Stearns' financial institutions group, which underwrote the issue, said that he expects other banks to follow suit.

"It is not unlikely that other banks will issue" said Mr. Khedouri. "But it is a fairly limited universe."

Mr. Khedouri declined to name other banks that may be interested, but other banks that are popular issuers of long-term subordinated debt securities include Banc One and Wachovia Corp.

Several capital markets experts, however, were doubtful that other banks would follow.

Some noted that the uniqueness of the security may keep other banks at bay. Other market observers noted that the issue also seemed pricey for investors. Traders noted that the issue was difficult to sell.

Bank analyst Thomas Stone of Duff & Phelps Credit Rating Co. said he "doesn't see the advantage" that other banks would gain from issuing 100- year debt.

"Others won't do it," said Mr. Stone. "I don't see a strong market demand for 100-year paper and secondly and there isn't much difference between 30-year debt and 100-year debt from a true duration measure.

Mr. Stone also noted that Republic Bank has customers who are interested in longer-term instruments.

Bank bond analyst Ethan Heisler of Salomon Brothers Inc. said that banks really do not need long-term money at this time. Most have issued a substantial amount of 10-year subordinated debt.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.