Mikhail Gorbachev's ouster saw some in the corporate bond markets digging in to watch the situation unfold, sources said yesterday.
Among those waiting was Salomon Brothers Inc., poised at mid-afternoon to price Florida Power & Light Co.'s $150 million of first mortgage bonds due 2021.
"Basically, we are looking for a little more stability," said Andy Macchia, a Salomon Brothers vice president.
The issue, subsequently priced at approximately 3:15 p.m., eastern standard time, carried a coupon rate of 9 1.8 and a spread of 112 basis points over 30-year Treasuries. The bonds mature in August 2021.
The issue is nonrefundable for five years. Moody's Investors Service Inc. rated it A-2, while Standard & Poor's Corp. assigned it an A rating.
Also yesterday, PepsiCo Inc., another investment grade issuer, priced its $250 million of notes due 1996.
The notes carried a 7 7/8% coupon and were priced at 99.733 to yield 7.94% or 70 basis points over comparable Treasuries.
The junk bond market also displayed caution following the news from the Soviet Union.
"We're all standing back and watching the removal of Gorbachev," said Kingman Penniman, a senior vice president at Duff & Phelps/MCM. INvestors did not want to panic and sell, but were not jumping into the market either, he said.
Mr. Penniman said the high-yield market has seen only a slight drop, approximately 1/4 to 1/2 point, he said. It witnessed a flurry of activity early on as some inventory adjusting occurred, but "trading has been rather dull," he said.
Amphenol Corp. announced plans to issue $100 million of senior secured debt yesterday while the market awaited Dr. Pepper Co.'s issue of $200 million of senior guaranteed notes and $50 million of preferred stock, Mr. Penniman added.
One high-yield issuer, Duracell International Inc. departed the junk bond market market yesterday, calling both its senior subordinated discount notes due 1998 and its 13 1/2% subordinated debentures due 2000 effective Sept. 15.
"I've never hated the junk bond market the way some people did," said. Keith Lyon, the battery company's vice president and treasurer. "But it's a very nice milestone in our evolution."
While the recalled debt's book value amounted to $299 million, the company will pay out $324 million due to the call premium.
To help retire the debt, Duracell invited more than 40 banks to increase their existing commitments to its domestic facility. All of the banks responded positively, and though the company had initially set out to raise $250 million in bank debt by Friday, the deal is expected to be substantially oversubscribed, Mr. Lyons said.
The bank financing is expected to mean a 6% to 6.5% savings for the company over its junk bonds. Mr. Lyons added, however, that the company continues to evaluate long-term financing opportunities.
"Along with everybody else, we're finding long-term financing rates to be very attractive," he said.
Meanwhile, Standard & Poor's downgraded some $575 million of Memorex Telex Corp.'s debt to D from CC. The agency lowered its ratings on $155 million of senior variable- rate guaranteed sinking fund notes due July 15, 1996, and $419 million of 13 1/4% senior guaranteed sinking fund notes due 1996 because the company failed to make scheduled interest payments Aug. 1. On July 16, Moody's lowered its ratings on $425 million on the company's subordinated debt to D after Memorex missed interest payments.