Utility deals figured prominently on yesterday's new-issue menu, and that sector's war on high-cost debt should keep them on the blueplate-special list for a while, market sources say.
"The utilities just have a lot of business to do with all the refunding that they're doing," one syndicate source said. "So we are going to see a lot of them. "
"It's not a question of new cash, it's a question of refinancing." added Phil Kazlowski, head of corporate bond trading at Citicorp Securities Markets Inc. He also expects utilities to continue refinancing their higher-cost debt.
Mr. Kazlowski also noted that spreads on 30-year callable utility and telephone issues have widened 10 to 15 basis points in secondary trading over the past three weeks.
One reason is increased supply, and the other is that the issues are trading at a premium, he said. Most accounts want a bond that is either noncallable for life or trading at par, Mr. Kazlowski noted.
In secondary trading yesterday. high-grades followed Treasuries, which closed up 1/2 point in the 30-year sector.
"We were up, we were down. now we're back up again," one trader said, adding that trading was "very quiet." While corporates held their spreads for the most part yesterday, he said he expects to see some widening soon because "everyone is long paper."
High-yield bonds ended unchanged.
Alabama Power issued two offerings totaling $275 million.
The first offering consisted of $100 million of 6.85% first mortgage bonds due 2002. Noncallable for five years the bonds were priced at 98.50 to yield 7.062%, or 62 basts points over comparable Treasuries. Moody's Investors Service rates the offering Al, while Standard & Poor's Corp. rates it A. Salomon Brothers Inc. won competitive bidding to underwrite the offering.
The second consisted of $175 million of 7.250% first mortgage bonds due 2007. Noncallable for five years, the bonds were priced at 98.65 to yield 7.40%, or 95 basis points over, 10-year Treasuries. Moody's rates the offering Al, while Standard & Poor's rates it A. Morgan, Stanley & Co. led a group that won competitive bidding to underwrite the offering.
Exxon Capital Corp. issued $250 million of 6.625% notes due 2002. The noncallable notes were priced at 99.746 to yield 6.66%, or 20 basis points over when-issued 10-year Treasuries. Both Moody's and Standard & Poor's rate the offering triple-A. UBS Securities Inc. won competitive bidding to underwrite the offering.
Enserch Corp. issued $150 million of 7% notes due 1999 at par. The noncallable notes were priced to yield 105 basis points over comparable Treasuries. Moody's rates the offering Baa2, while Standard & Poor's rates it BBB. A group led by First Boston Corp. won competitive bidding to underwrite the offering.
Arkansas Power & Light issued $100 million of 7.50% first mortgage bond due 2007. Noncallable for five years, the bonds were priced at 99.29 to yield 7.58%, or 112 basis points over 1 0-year Treasuries. Moody's rates the offering Baa2. while Standard & Poor's rates it BBB. Bear, Stearns & Co. won competitive bidding to underwrite the offering.
Moody's lowered Haynes International Inc.'s rating on its 13.50% senior subordinated notes due 1999 to Caa from B3, the agency said yesterday.
"The rating action reflects Haynes' deteriorating banking relationships that could prevent the company from paying its interest payment on the senior subordinated notes," a Moody's release says. "The recent quarterly losses have reduced the company's tangible net worth to levels close to the minimum allowed by its bank credit agreement."
Haynes is now renegotiating financial covenants with its banks. It was expected to come to an agreement by Aug. 10. but failed to do so, Moody's said. Haynes makes high-performance alloys.
Standard & Poor's has upgraded Maxtor Corp.'s subordinated debt to CCC-plus from CCC. The action affects about $100 million of rated debt, according to a Standard & Poor's release. The implied senior rating is B and the rating outlook is positive, the release says.
"Maxtor Corp.'s rating upgrade reflects management's progress in returning the company to profitability, and the expectation that financial measures will improve as new products become available," Standard & Poor's said. "This San Jose, Calif.-based manufacturer of high-performance magnetic and optical data storage products has emerged from a restructuring with a new management team, a broadened product portfolio, and improved earnings.