Texas-New Mexico Power Co. will probably have to offer a higher yield on its $150 million debentures deal to attract more investors, analysts said.
"They've got some buyers but not enough to put the whole package together," one analyst said. "The pricing just wasn't right on that."
Price talk on the seven-year offering called for a 12 1/4 to 12 1/2 coupon and was priced to yield 500 basis points over comparable Treasuries, the analyst said. That information, however, was a few days old, he added.
Monte Smith, Texas-New Mexico's treasurer, declined to comment on pricing but said, "We are negotiating to get it done as soon as we can do it."
The company faces an $85 million construction loan payment today that it had planned to pay using the $150 million offering's proceeds.
One reason investors may be holding out for a higher yield is approximately $73 million of first mortgage bonds rumored to be issued after the debentures, the analysts said. The first mortgage bonds would be senior to the debentures.
Texas-New Mexico last week cleared one hurdle to its debentures issue when Chase Manhattan Bank, as agent for the company's two bank lending groups announced that the banks had agreed in principle to amend the company's construction financing facilities for TNP One, Units 1 and 2.
"I don't see how they could have successfully sold the bond deal without having the banks in line," another analyst said earlier.
Under the agreement, if Texas-New Mexico raises $223 billion of debt or equity and prepays $181 million to its Unit 1 and Unit 2 lenders by Jan. 2, 1992, the lenders will grant extensions. The $223 billion figure includes the proposed $150 million offering. Unit 1 lenders will grant a 15-month debt payment extension, while Unit 2 lenders will grant a 14-month reprieve.
A Sept. 12 release issued by the company concerning the agreement makes no mention of first mortgage bonds.
But while Texas-New Mexico appeared to have troubles, the World Bank's $1.5 billion offering saw "exceedingly strong demand" from Asia, Europe, and North America, said Donald C. Roth, the bank's vice president and treasurer, in a prepared statement.
The bank issued $1.5 billion of 7.25% global bonds priced at 99.897 to yield 7.275% or 20 basis points over five-year Treasuries. Moody's and Standard & Poor's rate the deal triple-A. Goldman, Sachs & Co. and CS First Boston served as co-lead managers on the offering.
Another issuer, Tele-Communications Inc., saw investor demand drive its offering up to $150 million from $125 million earlier.
The 9.65% noncallable amortizing notes were priced at par to yield 210 basis points over 10-year Treasuries. Moody's rates the deal Baa3, while Standard & Poor's rates it BB-minus. Merrill Lynch was the lead manager.
Geico Corp. issued $100 million of debentures due 2021. Noncallable for 10 years, the debentures priced at 99.60 to yield 9.189% or 130 basis points over comparable Treasuries. Moody's rated the offering Aa3, while Standard & Poor's Corp. assigned an AA rating. Salomon Brothers served as sole manager.
The high-yield market was down about an 1/8 to a 1/4, while the high-grade market was up slightly.
As for yesterday's ratings, Standard & Poors downgraded Mead Corp.'s senior debt to BBB-plus from A-minus, the rating agency announced. The downgrade affects approximately $450 million of securities.
The downgrade was prompted by weaker-than-expected performance during the current cyclical downturn combined with heavier debt burdens brought on by high capital spending levels, Standard & Poors said. The rating agency expects the Dayton-Ohio companies credit protections to improve as the economy improves and management returns to stated financial policies. Standard & Poors also affirmed Mead's A-2 commercial paper rating.