The Tennessee Valley Authority sold $700 million of power bonds to a Salomon Brothers Inc.-led group yesterday and bought short-term Treasuries with the proceeds.

Salomon and minority-owned firm W.R. Lazard, Laidlaw & Mead Inc. bested six others groups competing underwrite the TVA's offering of Series G power bonds.

The group reoffered them as 7.625% bonds at 96.533 to yield 7.928%, or 55 basis points over comparable Treasuries.

The 30-year bonds are callable after five years at 104, moving to par in the last four years. TVA sold them to the Salomon group at a price of 96.053, a TVA spokesman said.

A syndicate desk source yesterday afternoon said the offering was selling well despite its large size and fairly aggressive pricing.

"It's a lot of wood to chop," he said.

TVA will use proceeds from the offer to refinance four issues of Federal Financing Bank debt, callable beginning in November.

"We are defeasing the bonds because they are not callable today," TVA chief financial officer William F. Malec said yesterday.

Through defeasance, TVA puts the Treasury securities into a trust to pay for calling the four series of Federal Financing Bank debt, a TVA spokesman explained. The process allows TVA to sweep the debt off its balance sheet, he said.

The four issues mark the last of TVA's callable debt the bank holds.

Since the TVA returned to the public agency debt market when Mr. Malec became chief financial officer in 1989, it has sold bonds seven times for a total of $13.5 billion. The offerings have translated into $200 million of annual interest savings.

All the offerings, except for a $1 billion 50-year offering in April, were to refinance long-term debt.

In the past three and a half years, TVA has refinanced about two-thirds of its outstanding debt. During that period its average longterm debt costs fell to 8.1% from 10.1%.

Another agency, the Federal National Mortgage Association, also issued debt yesterday. Fannie Mae issued $300 million of 6.93% medium-term notes due 2002. Noncallable for three years, the bonds were priced at 99.875 to yield 6.95%, or 39 basis points over comparable Treasuries. Lehman Brothers sole managed the offering.

Owens-Illinois has issued $200 million of 9 3/4% senior subordinated notes due 2004 at par. Morgan Stanley & Co. lead managed the offering.

In secondary trading yesterday, high-yield bonds finished flat in quiet trading.

"It's just a Monday in the summer, "one trader said. "There's not a lot going on." High-grade bonds tracked Treasuries, losing 1/4 point.

Yesterday's Ratings

Standard & Poor's Corp. downgraded Edisto Resources Corp.'s senior unsecured debt to D from CCC-minus and preferred stock to D from CC.

The rating agency removed the securities from CreditWatch where it had listed them for a possible downgrade on May 16. Standard & Poor's also downgraded the rating on the senior notes of Edisto's wholly owned subsidiary, NRM Energy Co. L.P., to D from CCC-minus and removed them from CreditWatch where they had been placed with developing implications on Jan. 16.

The agency's actions affect about $105 million of securities.

"The Dallas-based oil and gas exploration and production company announced that NRM Energy would not make the semiannual interest payment due Aug. 17 on its 13 7/8% sentor notes, due 1999, in light of Edisto's current financial position and liquidity problems," a Standard & Poor's release says.

Moody's Investors Service raised Reebok International Ltd.'s senior debentures due 1998 to A3 from Baa 1 and confirmed the company's Prime-2 commercial paper rating. The rating agency also upgraded Reebok's shelf registration to (P)A3 from (P)Baa 1.

"The upgrades are based on Reebok's continuing strong operating performance, modest leverage, and management's demonstrated commitment to a conservative financial policy." a Moody's release says.

Standard & Poor's has given a preliminary A-minus rating to $750 million of senior debt that Fleet Mortgage Group filed under a Rule 415 shelf registration. The agency also assigned a preliminary A-2 rating to Fleet's commercial paper program.

"Ratings are based on FMG's strong capital position, efficient operations, and an early demonstration of favorable financial flexibility," a Standard & Poor's release says. "The ratings are, however, capped to a large extent by the credit position of its majority owner, Fleet Financial Group Inc."

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