Junk underwriters are getting their deals together and taking them on the road.
"There are six breakfasts in L.A. [today]," said one underwriter who believes the next few weeks could be the "biggest two road show weeks in history."
A road show is a presentation during which company representatives tell their story, give details of the offering, and answer questions. About a dozen such presentations are scheduled for this week, with about 20 spread out over the next three weeks.
"I'd say he's not far off," said a buyside source when asked about the underwriter's estimates. "There's a lot of different little deals out there."
As for new issues that the source has seen recently, "I'd say credit quality has been okay, but the prices haven't been all that great."
Prices are the way they are "because everybody's starving for paper," he said.
Most of the offerings in the road show stage are small, though ADT Operations Inc.'s $600 million offering to be priced through Merrill Lynch & Co. is a notable exception, the underwriter and investor said.
ADT's deal is expected to consist of $250 million of senior notes due 2000 and $350 million of senior subordinated notes due 2003.
The road show for the equity portion was under way last week in Europe and Asia, and the debt portion will be held in the United States starting today, high-yield sources said.
Among junk issuers set to come to market this week is Jordan Industries Inc. The company plans to sell $275 million of senior notes due 2003 and senior subordinated discount debentures due 2005. Proceeds from the discount debentures are are expected to total $75 million. Donaldson, Lufkin & Jenrette Securities Corp. and Jefferies & Co. are underwriters. The deal is expected to be priced on Wednesday.
In secondary trading Friday, spreads on high-grade bonds ended unchanged. High-yield bonds ended about 1/8 point higher overall, as one trader noted "some fresh cash coming into the market."
New Issues
Hertz Corp. issued a two-part offering totaling $400 million. The first tranche consisted of $150 million of 6.625% junior subordinated notes due 2000. The noncallable notes were priced at 99.94 to yield 6.636%, or 120 basis points more than thje yield for comparable Treasuries.
The second part consisted of $250 million of 7% junior subordinated notes due 2003. The noncallable notes were priced at 99.88 to yield 7.017%, or 125 basis points more than comparable Treasuries. Moody's Investors Service rates the offering Baa3, while Standard & Poor's Corp. rates it BBB. J.P. Morgan Securities Inc. was the lead manager for the offering.
Pacific Bell issued $300 million of 7.375% debentures due 2043. Noncallable for 20 years, the debentures were priced at 99.373 to yield 7.423%, or 78 basis points more than comparable Treasuries. Moody's rates the offering Aa3, while Standard & Poor's rates it AA-minus. Salomon Brothers Inc. was the sole manager.
First Union issued $250 million of 6.625% subordinated notes due 2005. The noncallable notes were priced at 99.778 to yield 6.652%, or 90 basis points above comparable Treasuries. Moody's rates the offering A3, while Standard & Poor's rates it BBB-plus. Goldman, Sachs & Co. was the lead manager.
Federal Home Loan Banks reportedly issued $200 million of 4.45% step-up notes due 1998 at par. The notes are noncallable for two years, after which the coupon steps up to 6%. Nomura Securities managed the offering.
Florida Power & Light issued $110 million of 6% first mortgage bonds due 2003. The noncallable notes were priced at 99.071 to yield 6.127%, or 37.5 basis points over comparable Treasuries. Moody's rates the offering Aa3, while Standard & Poor's rates it AA-minus. J.P. Morgan won competitive bidding to underwrite the offering.
Chesapeake & Potomac Telephone Co. of Virginia issued $100 million of 6.125% notes due 2005. The noncallable notes were priced at 99.822 to yield 6.146%, or 37.5 basis points more than 10-year Treasuries. Moody's rates the offering Aaa, while Standard & Poor's rates it AA-plus. Lehman Brothers managed the offering.
Rating News
Standard & Poor's upgraded Tyco Laboratories Inc.'s senior debt to BBB-plus from BBB. The rating agency also raised its rating on Tyco's senior debt filed under a Rule 415 shelf registration to preliminary BBB-plus from preliminary BBB. About $700 million of debt is outstanding.
"The rating upgrades reflect healthy operating performance through the economic cycle, continued strong cash-flow generation, and expectations that management will take actions to limit financial risk in its acquisitions strategy," a Standard & Poor's release says. The ratings outlook is stable.
