RJR Nabisco Holdings Corp.'s bonds gained 1 3/4 to two points after Standard & Poor's Corp. upgraded its senior debt, and Moody's upgraded the senior debt of its operating companies and RJR Capital Corp. to investment grade from junk yesterday.

"It's been quite a wild ride," Edward Mally, a vice president with Salomon Brother Inc.'s high-yield research department, said.

Mr. Mally said despite a questionable future for RJR only a few years ago, the company was "fundamentally a sound, strong business with solid cash flow."

Several factors combined to help RJR Nabisco achieve investment grade status, a high-yield buyside source said.

"They are a recession-proof industry and the banks were very, very cooperative with RJR, so they had a number of things going for them all the way along." he said.

"Anyone in America who knows how to read and is in this business" knew the upgrade was coming, a trader added. He said he expects more activity in the bonds as high-yield players sell their RJR Nabisco bonds to investment-grade buyers.

Traders said the agencies' upgrades freed certain buyers to purchase the bonds who had been restricted earlier from buying high-yield securities.

Standard & Poor's Corp. upgraded RJR Nabisco Holdings and its units senior debt rating to BBB-minus from BB-plus. The agency also raise the subordinated debt, preferred equity redeemable cumulative stock, and cumulative convertible preferred stock ratings to BB-plus from BB-minus. The agency removed the issues from CreditWatch, where they had been placed with positive implications on Oct. 7.

"The upgrade reflects the company's improved balance sheet strength following the just-completed exchange of $1.7 billion of new common stock for preferred stock and the recent $2.1 billion PERCs offering, proceeds from which were used for debt reduction," a Standard & Poor's release said. "These two transactions were significant steps in management's aggressive program to deleverage the company since its 1989 leveraged buyout."

Standard & Poor's action affects about $12 billion of rated debts and preferred stock, the release said.

Moody's raised the ratings on RJR Nabisco notes, sinking fund debentures, Eurobonds, revenue bonds, and medium-term notes to Baa3 from Bal. The agency upgraded RJ Reynolds Industries Inc.'s sinking fund debentures, notes, and Eurobonds to Baa3 from Bal.

Reynolds (R.J.) Overseas Finance Co. N.V.'s guaranteed zero coupon notes were upgraded by the agency to Baa3 from Ba1. Nabisco Brands Inc.'s sinking fund debentures and revenue bonds were upgraded to Baa3 from Ba1. Nabisco Inc.'s sinking fund debentures were upgraded to Baa3 from Ba1.

Ratings on R.J. Reynolds Tobacco Company's sinking fund debentures were raised to Baa3 from Ba1. RJR Nabisco Capital Corp.'s senior notes were upgraded to Baa3 from Ba1; its subordinated debentures and senior subordinated notes were upgraded to Ba2 from Ba3. RJR Nabisco Holdings Corp. senior converting debentures were upgraded to Ba3 from B1; preferred stock was upgraded to Ba3 from B2; and Standard Brands Inc. sinking fund debentures were upgraded to Baa3 from Ba1.

In secondary trading, high-yield bonds were largely unchanged, while high grades gained 1/16 to 1/8 in the short end and 1/8 in the long-end in lackluster trading.

American Express Centurion Bank yesterday issued $200 million of 4.67% bank notes at par. The notes due Dec. 15, 1992 were priced at 25 basis points over one-year Treasury bills. Moody's rates the offering Aa3, while Standard & Poor's rates it AA-minus. Lehman Brothers lead managed the offering.

Arizona Public Service issued $150 million of 9% first mortgage bonds due 2021. Noncallable for 10 years, the bonds were priced at 98.875 to yield 9.110% or 130 basis points over comparable Treasuries. Moody's rates the offering Baa3, while Standard & Poor's rates it BBB. Salomon Brothers lead managed the offering.

Federal Home Loan Banks issued $113 million of 6.375% notes at par. Due in 1996, the notes were priced to yield 16 basis points over comparable Treasuries. Merrill Lynch & Co. lead managed the offering.

PepsiCo yesterday increased its offering priced on Friday to $200 million from $150 million. The 5.875% notes due 1994 were priced at 99.742 to yield 5.970% or 47 basis points over comparable Treasuries. Moody's rates them A1, while Standard & Poor's rates them A. Lehman managed the offering.

Standard & Poor's has placed First Union Real Estate Investments' BBB senior debt and BBB-minus subordinated debt ratings on CreditWatch for a possible downgrade, according to a Standard & Poor's release. About $87.6 million of debt is effected. An Ohio-based real estate investment trust, First Union owns and manages a diversified portfolio of commercial properties, most of which are enclosed, regional shopping malls. The trust recently announced a dividends cut, citing continued financial constraints in the commercial real estate industry.

"S&P is concerned that the dividend cut, the second in the past 12 months, may be an indication that it could take longer than anticipated for the trust to reverse a steady, albeit marginal, deterioration in overall operating performance," the release said.

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