Sears, Roebuck and Co.'s offering swelled to $900 million from the $600 million originally planned as strong investor demand helped the company prepare for an economic upturn.
"Sears wants to lock in low-cost long-term financing to achieve a competitive advantage as the economy recovers and interest rates rise," Desmond Wong, corporate director of finance said.
The offering originally included three-, seven- and 20-year tranches at $200 million each.
Sears increased the three-year tranche to $350 million of 7% noncallable notes priced at 99.777 to yield 7.083% or 110 basis points over when-issued three-year Treasuries.
The company increased the seven-year pieece to $250 million of 8.45% noncallable notes priced at part to yield 127 1/2 basis points over comparable Treasuries.
Sears increased the 20-year tranche to $300 million of 9.375% noncallable bonds priced at part to yield 144 basis points over when-issued 30-year Treasuries.
"We see the success of the 20-year offering, which was upsized from the planned $200 million to $300 million, as investors' vote of confidence in Sears as the economy recovers," Mr. Wong said.
Goldman, Sachs & Co., Dean Witter Reynolds Inc., and Morgan Stanley & Co. served as co-lead managers on the offering. Goldman was bookrunner.
The Sears deal led a corporate charge that unleashed more than $1.5 billion of new paper onto the market.
Yesterday's new issues also included New York State Electri & Gas Corp., which issued $150 million of 8.875% first mortgage bonds due 2021. Noncallable for 10 years, the bonds were priced at 98.705 to yield 9%, or 107 basis points over comparable Treasuries. Moody's Investors Service rates the offering Baal, while Standard & Poor's Corp. rates it BBB-plus. Merrill Lynch lead managed the offering.
Chase Manhattan Corp. issued $150 million of 9.75% subordinated notes due 2001. The noncallable notes were priced at par to yield 9.75% or 223 basis points over when-issued 10-year Treasuries. Moody's rates the deal Ba2, while Standard & Poor's rates it BBB. Merrilly Lynch lead managed the offering.
Republic New York Corp. issued $150 million of 8.25% subordinated notes due 2001. The noncallable notes were priced at 99.527 to yield 8.32%, or 80 basis points over the when-issued 10-year Treasuries. Moody's rates the deal A1, while Standard & Poor's rates it AA-minus. Lehman Brothers sole managed the offering.
AMR Corp. issued $150 million of notes due in 1998 that carry an 8.10% coupon, which is paid monthly. The noncallable notes were priced at par to yield 8.238% on a semiannual bond equivalent yield basis, which is 105 basis points over comparable Treasuries. Moody's rates the deal Baa1, while Standard & Poor's rates it BBB-plus. Lehman managed the offering alone.
Standard Commercial Corp. issued $60 million of convertible subordinated debentures due 2007. The debentures were priced at par to yield 7.25%. Callable after 3.3 years at par, they convert into the company's common stock at a conversion price of $32.45. Wheat First Butcher & Singer Capital Markets managed the offering.
High-grade corporates ended the day off 1/4 point to 3/4 point. High-yield bonds were flat to up slightly in secondary-market trading over all.
The Playtex Family Products Corp. announced that Sara Lee Corp. would make a investment in the company, holding 25% of the outstanding equity. The news lifted Playtex bonds three to four points.
Standard & Poor's has downgraded Tenneco Inc.'s and related entities' senior debt to BBB-minus from BBB, subordinated debt to BB-plus from BBB-minus, preferred stock to BB-plus from BBB-minus, and commercial paper to A-3 from A-2, the agency announced in a press release. Standard & Poor's also assigned a BB-plus rating to a recently filed $500 million issue of preferred equity redemption cumulative stock. Approximately $10.7 billion of debt remains outstanding.
"The actions reflect prospects for a continuation of weak internal cash flows and aggressive debt leverage," an agency release said.
Standard & Poor's has affirmed Mitsui Marine & Fire Insurance Co.'s AAA claims-paying ability and senior debt ratings based on the company's "strong market position, superior underwriting results, and very conservative capitalization."
The agency also affirmed Citizen Utilities Co.'s senior secured debt and senior unsecured debt at AAA and commercial paper at A-1 plus. About $486 million of total debt is outstanding, according to a Standard & Poor's release.