Tempted by Low Rates, Pfizer Returns To Term Market After a 10-Year Hiatus
Attractive interest rates lured Pfizer Inc. back to the term debt market with a $250 million offering after a 10-year absence.
"We haven't done a public debt offering in the term area for many, many years," William E. Harvey, the drug company's treasurer said.
Pfizer was one of a number of high-grade corporate issuers tapping the market yesterday.
Domestically, the company gets most of its financing through the short-term commercial paper market, Mr. Harvey said. But as Pfizer watched interest rates start to drop in June, it decided to lock in some attractive longer rates, he said.
Tony Biesada, a Pfizer spokesman, said the company had not issued public debt of any significant amount since 1981.
Pfizer yesterday issued $250 million of 7.125% senior notes due 1996. The noncallable notes were priced at 99.77 to yield 7.18%, or 27 basis points over comparable Treasuries. Both Moody's Investors Service and Standard & Poor's Corp. assigned triple-A ratings.
"The issue was well received," Mr. Harvey said. Pfizer was unsure whether it would issue $200 million or $250 million of the notes, but investor interest led the company to do a larger offering, he said.
Lazard Freres & Co. led the deal, assisted by co-managers Goldman, Sachs & Co.; Merrill Lynch & Co.; J.P. Morgan Securities Inc.; and Chase Securities.
Craig Baskin, a group vice president at Duff & Phelps/MCM Investment Research Co., theorized that Pfizer chose to do a five-year offering instead of having to roll over the $250 million every three months or so in the commercial paper market.
Unlike Moody's and Standard & Poor's, Duff & Phelps rates the notes AA, Mr. Baskin said. Pending litigation over the company's Shiley heart valve, pulled from the market in 1986, accounted for the agency's lower rating, he said.
The litigation troubled Standard & Poor's less.
"That's not been a concern," said David Lugg, a rating officer there. "We've noted it and we keep an eye on it."
Also issuing yesterday were ITT Financial, Pepsico Inc., Southern California Gas, Texaco Capital, Federal Housing Loan Banks, and Elizabethtown Water Co.
ITT Financial offered $200 million of 7.125% notes due 1994. The noncallable notes were priced at 99.944% to yield 7.145%, or 92 basis points over Treasuries. Moody's rates the notes A2, while Standard & Poor's assigns an A. First Boston Corp. lead managed the offering.
Pepsico offered $250 million of 7.75% notes due 1998. The noncallable notes were priced at 99.848 to yield 7.779%, or 53 basis points over comparable Treasuries. Moody's rated the notes A1, while Standard & Poor's rates them A. J.P. Morgan was lead manager of the offering. The issue was increased from the $200 million originally planned.
Southern California Gas issued $150 million of 8.750% first mortgage bonds due 2021. Noncallable for 10 years, the bonds were priced at 98.434 to yield 8.90% or 108 basis points over comparable Treasuries. Moody's rates the bonds A1, while Standard & Poor's rates them A-plus. Lehman Brothers won competitive bidding to manage the offering.
Texaco Capital issued $150 million of 8.25% debentures due 2006. The noncallable debentures were priced at 99.57 to yield 8.30% over 10-year Treasuries. Moody's rates the deal A1 while Standard & Poor's rates it A-plus. First Boston lead managed the offering.
Federal Home Loan Banks issued $100 million of floating rate notes due 1994. The notes float monthly at 75 basis points under the cost of funds index and pay quarterly. Goldman Sachs managed the offering.
Elizabethtown Water issued $27.5 million of 8.750% debentures due 2021. Nonrefundable for five years, the debentures were priced at 98.558% to yield 8.88% or 106.5 basis points over comparable Treasuries. Moody's rates the deal A3, while Standard & Poor's assigns an A. Tucker Anthony Inc. won the competitive bidding to manage the offering.
Late Tuesday, Dayton Hudson Corp. issued $100 million of 9% debentures due 2021. The debentures were priced at 98.973 to yield 9.10% or 130 basis points over comparable Treasuries. Moody's rates the notes A3, while Standard & Poor's rates them A. Goldman Sachs managed the offering.
The investment-grade market over all was down, following the Treasury market.
Donaldson, Lufkin & Jenrette Securities Corp.'s high-yield bond conference in Greenwich, Conn., yesterday quieted that market, which remained primarily unchanged.
Making high-yield news was P&C Food Markets Inc., which was expected to price its $125 million senior note offering due 2001 Monday. Rumor says the notes will be priced to yield 11 1/2 to 11 3/4.
Elsewhere, Carter Hawley Hale Stores' 13 1/4 and 13 1/2 bonds climbed about four points on news of a sweetened offer for its debt by Sam Zell. Mr. Zell formed a $1 billion fund about a year ago to invest in distressed companies that had good businesses but bad capital structures, one trader explained. Mr. Zell increased an earlier offer for all of the unsecured claims against the company -- including the bonds -- to 47 cents on the dollar. The bonds -- which had been trading at 42 to 43 previously -- then traded up to that level.
As for yesterday's ratings, Fitch Investors Service Inc. has assigned an A-minus rating to MDU Resources Group Inc.'s proposed $20 million first mortgage bonds issue. The proposed offering is the final takedown under a shelf registration. Fitch also affirmed its ratings on MDU's A-minus outstanding first mortgage bonds and preferred stock, as well as its F-1 commercial paper.
"The credit trend is improving," Fitch said.
