The Tennessee Valley Authority pulled off a $500 million surprise yesterday, selling two offerings instead of one for a total of $1.25 billion of new debt issued.
In addition to pricing its $750 million offering as scheduled yesterday, the agency also priced a $500 million deal scheduled for tomorrow.
The $750 million issue marked the largest competitive bid offering ever by an American electric utility, a TVA release says. The agency had also solicited bids for the $500 million offering, but later withdrew that invitation.
Instead, it chose a negotiated deal through a group led by Goldman, Sachs & Co., the bidder that captured the $750 million offering.
"We decided to take advantage of favorable market conditions today, rather than risk the market moving away from us by Thursday and lose the opportunity to realize additional savings," Robert L. Yates, the TVA's vice president and treasurer, was quoted as saying in the release.
Mr. Yates yesterday explained the authority had seen nothing ominous ahead that might have altered market conditions.
Goldman's bid on the $750 million offering helped it win the $500 million deal, he added.
"We were pleased with their aggressive bid on the competitive deal, and of course that entered into our thinking for selecting them for the negotiated deal," Mr. Yates said.
The competitive offering consisted of $750 million of 6.25% bonds due 1999. Noncallable for three years, the bonds were priced at 98.47 to yield 6.526% or 15 basis points over comparable Treasuries. The cost to the TVA was 98.270, an authority spokeswoman said.
The second offering consisted of $500 million of 6.875% bonds due 2002. Noncallable for three years, the bonds were priced at 98.585 to yield 7.075% or 19 basis points over comparable Treasuries.
Proceeds from the two offerings will refinance debt currently held by the Federal Financing Bank. They will allow the TVA to cut its annual interest expense by $7 million annually. The agency's overall refinancing savings since 1989 now total $191 million annually.
In other news, Kroger Co. unveiled plans to redeem $100 million of its 13 1/8% subordinate debentures at a price of 109.375%. Following the redemption, $112.9 million of the 13 1/8% subordinated debentures and $223.8 million of the company's 12 7/8% percent senior subordinated debentures will remain outstanding, a Krogers release says.
In secondary activity, high-grade bond prices closed about 1/8 point higher, while high-yield bond prices finished unchanged.
Kellogg issued $300 million of 5.90% notes due 1997. The noncallable notes were priced at 99.785 to yield 5.95% or 13 basis points over comparable Treasuries. Both Moody's Investors Service and Standard & Poor's Corp. have assigned triple-A ratings. Goldman Sachs lead managed the offering.
Noranda Inc. issued $200 million of 8.625% debentures due 2002. The noncallable debentures were priced at 99.664 to yield 8.675% or 180 basis points over comparable Treasuries. Moody's rates the offering Baa2, while Standard & Poor's rates it BBB-minus. Goldman Sachs lead managed the offering
Crestar Financial issued $125 million of 8.250% subordinated notes due 2002 at par. The noncallable notes were priced to yield 130 basis points over comparable Treasuries. Moody's rates the offering Ba2, while Standard & Poor's rates it BBB-minus. Morgan Stanley & Co. lead managed the offering. Northern Illinois Gas issued $75 million of 8.250% first mortgage bonds due 2022.
Noncallable for five years, the bonds were priced at 99.75 to yield 8.272% of 61 basis points over comparable Treasuries. Moody's rates the offering Aa1, while Standard & Poor's rates it AA. Merrill Lynch & Co. won competitive bidding to underwrite the offering.
Federal Home Loan Banks issued $61 million of 5.96% notes due 1997 at par. Noncallable for a year, the bonds were priced to yield 5.96% or 14 basis points over comparable Treasuries. Paine Webber Inc. sole managed the offering
Federal Home Loan Banks issued $32.5 million of 4.850% notes due 1995 at par. Noncallable for a year, the notes were priced to yield seven basis points over comparable Treasuries. Goldman Sachs sole managed the offering.
Standard & Poor's has listed on Credit Watch for a possible upgrade USAir Group Inc.'s B-minus preferred stock rating and USAir Inc.'s B-plus senior unsecured debt, BB-plus equipment trust certificates, and BB-minus unsecured industrial revenue bond ratings.
The action affects about $2.5 billion of rated debt, a Standard & Poor's release says.
"The action reflects the announcement of British Airways PLC's proposal to invest $750 million in USAir," the release says. "The investment would bolster USAir's balance sheet, weakened by three years of heavy losses, and provide a link to British Air's strong international route network."
Moody's is also considering upgrades in light of the British Airways news. It is reviewing USAir Group's preferred stock rating and the long-term debt ratings of USAir Inc., including securities originally issued by Piedmont Aviation Inc., the agency's release says.
"Moody's review will focus on the investment's impact on USAir's financial structure, and examine operating benefits and synergies to be realized from this global alliance with British Airways," the Moody's release says. "Moody's will also evaluate possible asset purchases from TWA."
The agency is reviewing USAir Group Inc.'s "b3" convertible preferred stock. It is also reviewing USAir Inc.'s equipment trust and pass-through certificates rated Ba2; senior debentures and industrial revenue bonds rated Ba3, and shelf registration rated (P)Ba3; and Piedmont Aviation Inc.'s equipment trust certificates rated Ba2 and industrial revenue bonds rated Ba3.
Standard & Poor's affirmed Coca-Cola's AA senior debt and A-1-plus commercial paper ratings after Coke's board of directors authorized a 100-million-share buyback program through the year 2000. The company has about $1 billion of debt outstanding, a Standard & Poor's release says.
"Although the company will continue to invest heavily in its core business, S&P expects Coke's strong free cash flow will enable the company to buy in shares while managing a capital structure in line with the current ratings." Standard & Poor's said in a release. The program's total cost would exceed $4 billion at the most recent share price, the agency said.
"However, the company intends to make only opportunistic purchases of its stock over the life of the program so as not to jeopardize the existing debt ratings," Standard & Poor's said.