Whether Harcourt Brace Jovanovich Inc. bondholder holdouts would win their "game of chicken" or have their gooses cooked, engrossed the high-yield market yesterday.
"We don't have anything to announce yet and probably won't until tomorrow," Peter Farwell, a General Cinema spokesman said late yesterday afternoon.
General Cinema Corp. last week vowed to yank its tender offers and kill its $1.5 billion merger agreement with Harcourt if 90% of the bondholders in each class of Harcourt's publicly traded bonds failed to tender their securities by 5 p.m. yesterday.
Yesterday's deadline marked the third General Cinema had extended.
Mr. Farwell refused to say whether the 90% benchmarks had been reached, but did say that General Cinema had made no decisions yet.
The holdouts were thought to be small speculators who bought the bonds at prices higher than the tender offers in hopes that other holders would push the offer through, one high-yield securities fund manager said.
With the tender offers and the merger complete, the holdouts would have high-coupon bonds with an investment-grade credit, General Cinema, underlying them, he said. Standard & Poor's gives General Cinema an implied senior debt rating of BBB-plus and Harcourt an implied senior debt rating of CCC-plus.
"It's a game of chicken," the manager said. "It's a tough way to make a buck, but if it works you make good money."
"The conjecture is that General Cinema could walk on the deal," one trader said, addting that he saw virtually no movement in the bonds by midafternoon. Another trader added, "You lose, you lose big time."
By late last Friday, General Cinema's had only about 87.5% of the necessary bonds in each class. The most troublesome class proved the 14 1/4 subordinated debentures, where holders tendered 81.3% or $163 million of the $200 million outstanding.
Holders of the 13% senior note tendered 91.8% or $184 million of the $200 million outstanding. They tendered 85.1% or $426 million of the $500 million of 13 3/4% senior subordinated debentures; 89.2% or $453 million of the $507 million of 14 3/4% subordinated discount debentures and 89.1% or $392 million of the $440 million outstanding 14 3/4% subordinated pay-in-kind debentures.
The high-yield market, fixated on the Harcourt saga, was "trending sideways" and off about 1/4 point. The high-grade market saw little activity and was off anywhere from 1/4 to 3/8 on the short end to a point in the long end.
Phillip Morris Companies Inc. issued $350 million of 8.250% senior notes due 2003. The noncallable notes were priced at 99.582 to yield 8.305% or 75 basis points over 10-year Treasuries. Moody's rates the deal A2, while Standard & Poor's rates it A. Merrill Lynch & Co. lead managed the offering.
Household Finance Corp. issued $150 million of 7.8% notes due 1996. The noncallable notes were priced at 99.714% to yield 7.87% or 95 basis points over comparable Treasuries. Moody's rate the deal A3, while Standard & Poor's rates it A-plus. Lehman Brothers was sole-manager the offering.
Transamerica Financial Corp. issued $100 million of 7.125% medium-term notes due 1994. The noncallable notes were priced at 99.875 to yield 7.172% or 96 basis points over comparable Treasuries. Moody's rates them A2, while Standard & Poor's rates them A-plus. UBS Securities Inc. sole-managed the offering.
Enron Corp. filed a shelf registration with the Securities and Exchange Commission to offer up to $300 million of debt securities. The offering is part of a $400 million offering, $100 million of which had been registered earlier.
Enron will use proceeds to retire debt and for general corporate purposes.
"There is nothing planned at this point," Enron asisstant treasurer William Gathmann said. Enron has had $400 million in shelf registration for the past four or five years, he said. It issued $300 million of long-term debt in April and was simply seeking to build up the shelf again, he said.
Standard & Poor's affirmed its AAA rating on John Hancock Mutual Life Insurance Co.'s claims paying ability. John Hancock's "leadership position in the life insurance industry, an excellent distribution network, and a very large and diverse customer base," prompted the agency's rating.