Wedding bells for Bell Atlantic Co., Tele-Communications Inc., and Liberty Media Co. spurred tightening in TCI debt and some slight widening in Bell Atlantic issues.
"We own TCI paper and it [tightened] about 40 basis points. Obviously, Bell is a very strong credit, and this is a way of strengthening TCI," said Kenneth D. Malamed, managing director and director of fixed income at Wertheim Schroder Investment Services in Beverly Hills.
TCI is the world's largest cable television provider.
"As a bondholder, it's a better deal for TCI than for Bell," Malamed said, adding, however, that the news didn't seem to have hurt Bell Atlantic debt too much. Malamed estimated that Bell Atlantic paper was off by roughly five basis points.
"It's very positive for TCI if it goes through," said Stewart Morel, a vice president and industrial analyst at UBS Securities Inc., noting that the plan has to clear some "major" regulatory hurdles.
"For Bell Atlantic, certainly it weakens their financial measurements, but the market seems to be looking past that right now." Morel said.
But later in the day, Morel noted that some late-day actions taken by rating agencies could trigger some additional widening in the spreads of Bell Atlantic issues today.
Standard & Poor Corp. lowered Bell Atlantic debt following the announcement. The rating agency cut the company's implied senior debt to a from AA-minus. It also placed TCI and its affiliates on CreditWatch for a possible upgrade.
Moody's Investors Service said it is reviewing for a possible downgrade the short-term debt ratings of Bell Atlantic Corp.'s supported affiliates and the long-term debt ratings of its regulated telephone subsidiaries. Concurrently, Moody's put TCI's long and short-term ratings under review for a possible upgrade.
Duff & Phelps Credit Rating Co. put the debt of Bell Atlantic Capital Funding Corp. and Bell Atlantic Financial Services on Rating Watch-Down. Notes of both entities are rated A-plus, the agency said. Duff & Phelps also put TCI's debt on Rating Watch-Up.
For its part, Fitch Investors Service Inc. put TCI's BBB-minus senior debt, BBB-plus subordinated debt, and F-3 commercial paper on FitchAlert for a possible upgrade. While Fitch does not formally rate Bell Atlantic, it affirmed ratings on its telephone subsidiaries.
According to a Bell Atlantic release, the merger between Bell Atlantic, TCI, and Liberty Media Corp. would create "the world's premier communications, information, and entertainment company," according to a Bell Atlantic release.
The deal, valued at $21 billion to $22 billion if executed at current values, would reportedly rank second in corporate bond history after Kohlberg Kravis Roberts & Co.'s $30.6 billion takeover of RJR Nabisco in April 1989.
At a press conference yesterday, Raymond W. Smith, Bell Atlantic's chairman and chief executive officer, said his company plans to turn a letter of intent to merge with TCI and Liberty Media Corp. into a definitive agreement "as quickly as possible."
The merger will help the United States maintain its preeminence in global markets, Smith said.
"This is one area of American leadership that we are not going to lose," Smith said, "In short, we think this is the perfect information age marriage."
According to a Bell Atlantic press release, the newly formed company will be one of the world's largest information distribution and multimedia companies, and will define a new industry with its "considerable" programming and delivery resources.
The company will be present in 59 of the top 100 U.S. markets, with more than 22 million current telephone and cable customers. The transaction is expected to close "in the latter part of 1994," the release says.
"Bell Atlantic, TCI, and Liberty Media combine leading telephone, wireless, and cable networks in the U.S. and overseas with cutting edge video programming and new interactive, multimedia technologies," Smith said in the release.
In announcing its downgrade, Standard & Poor's said the action reflects "Bell Atlantic's management's increased willingness to assume heightened business and financial risk."
In addition to its action on the company's implied senior debt, Standard & Poor's also lowered Bell Atlantic Capital Fundings' senior unsecured debt to A from AA-minus, and commercial paper to A-1 from A-1-plus. It lowered Bell Atlantic Financial Services' senior unsecured debt to A from AA-minus, and commercial paper to A-1 from A-1-plus.
The rating agency said that the ratings of those entities and other Bell Atlantic units have been placed on CreditWatch for a possible downgrade.
In secondary trading yesterday, junk prices gained about 1/2 point with cable issues gaining as much two to three points. Aside from TCI and Bell Atlantic issues, spreads on high-grade bonds ended mostly unchanged.
In other news yesterday, ABN Amro became the third member of the century club this year yesterday with its $150 million offering to 100-year subordinated deposit notes.
Walt Disney and Coca-Cola both issued bonds with 100 year maturities in July.
ABN Amro issued $150 million of 7.125% subordinated deposit notes due 2093. The noncallable bonds were priced at 99.178 to yield 7.148% or 110 basis points more than the old 30-year Treasury bonds. The offering was increased from $100 million. Moody's rates the offering Aa2, while Standard & Poor's rates it A-plus. Morgan Stanley & Co. was lead-manager on the offering.
Loews Corp. sold $400 million of 7% debentures due 2023. Noncallable for 10 years, the debentures were priced at 97.774 to yield 7.182% or 110 basis points more than comparable Treasuries. J.P. Morgan Securities won competitive bidding to underwrite the offering. Moody's rates the offering A1, Standard and Poor's rates the offering AA-minus and Fitch rates the deal AA.
Gillette Co. issued $200 million of 5.75% notes due 2005. The noncallable notes were priced at 99.677 to yield 5.788% or 53 basis points more than 10-year Treasuries. Moody's rates the offering A2, while Standard & Poor's rates it A-plus. J.P. Morgan Securities was lead manager.
Federal National Mortgage Association issued $200 million of 4.38% step-up medium-term notes due 1998 at par. The notes were priced to yield 57 basis points more than two-year Treasuries. The notes are noncallable for two years, and the coupon steps up to 5.38% in October 1995. Lehman Brothers managed the offering.
Walt Disney sold $125 million of 5.80% medium-term notes due 2008 at par. The noncallable notes were priced to yield 55 basis points more than 10-year Treasuries. Moody's rates the offering Aa3, while Standard & Poor's rates it AA-minus. Morgan Stanley managed the offering, which was increased from $100 million.
