Big demand -- some of it from investment-grade buyers -- has vaulted WestPoint Stevens Inc.'s junk deal to $950 million from $600 million, high-yield sources said yesterday.

The offering is expected to be priced today.

"It's the first big deal that we've had in quite some time," said Fred Cavanaugh, a vice president and portfolio manager at John Hancock's $345 million Strategic Income Fund. A good-sized offering enables a large fund to buy a portion significant enough to have an impact on the fund without having its piece represent substantial percentage of the total offering, Cavanaugh said.

WestPoint Stevens increased the senior note portion, which proved popular with the crossover crowd, to $400 million from $200 million and the senior subordinated portion to $550 million from $400 million.

The issuer was able to increase the size f the offering while cutting back price talk. Westpoint cut talk on the senior portion to the 8 3/4% to 8 1/8% range from 8 7/8% to 9 1/8%. It cut talk on the senior subordinated portion to 9 3/8% to 91/2% from a range of 9 1/2% to 9 3/4%.

"Our recommendation is that they are not a purchase at that price talk based on the fundamentals of the company," said Jane Haugh, an assistant vice president at Duff & Phelps Corp. A shortage of supply in the high-yield market could be pushing prices up as well, Haugh said.

Cavanaugh, whose fund put in an order for the deal, likes the company's cash flow and thinks the debt restructuring plan it is currently undertaking is a positive step. Westpoint -- a bed linen and bath towel manufacturer -- also has good products and good market share, he said.

"We like their margins," Cavanaugh said, adding that the company's prospects are likely to improve as the economy picks up.

In related news yesterday, Valley Fashions Corp. and WestPoint-Pepperell, its 95% owned subsidiary, said that the Superior Court of Troup County, Ga., late Monday granted their motion to dismiss a lawsuit brought against them and others two years ago by Joseph Lanier Jr., Grace Brothers, Ltd. and Kidder Peabody & Co.

The suit relates to a 1989 leveraged buyout.

The court also denied the plaintiff's attempt to stop the proposed merger of Westpoint Pepperell and Valley Fashions and to enjoin the special Westpoint Pepperell shareholders meeting scheduled for Dec. 10. Shareholders are scheduled to vote on the merger that day.

"We view the court's ruling as a total victory in the case," said Keith B. Stein, senior vice president and general counsel of Valley Fashions and "While we would expect the plaintiffs to appeal, we are confident that based on the Superior Court's decision the special shareholders meeting on December 10 will proceed as scheduled."

According to the release, West-Point Pepperell is "the nation's leading manufacturer of bed and bath textile products and accessories, and is also, through its Alamac subsidiary, a leading domestic manufacturer of circular knit sportswear fabrics."

Some of the company's consumer products are marketed under the brand names Martex, Utica, Stevens, Vellux and Lady Pepperell, as well as under licensed designer labels including Ralph Lauren, Collier-Campbell, Louis Nicole, Gloria Vanderbilt, Sanderson, Eileen West, Joe Boxer, Liberty of London, Barbie, and Nickelodeon.

In secondary trading yesterday, spreads on high-grade issues ended two to three basis points tighter owing to the Treasury market's decline. High-yield bonds ended unchanged as the market focused on new issues.

Now issues

Ford Motor Credit Co. issued $500 million of 5 5/8% notes due 1998. The noncallable notes were priced at 99.746 to yield 5.684% or 57 basis points more than comparable Treasuries. Moody's Investors Service rates the offering A2, while Standard & Poor's Corp. rates it A. Lehman Brothers was lead manager.

Korea Development Bank came to market with a two-part offering totaling $400 million. The first tranche consisted of $200 million of 5.875% notes due 1998. The noncallable notes were priced at 99.87 to yield 5.905% or 74 basis points more than comparable Treasuries. The second piece consisted of $200 million of 6.75% notes due 2005. The noncallable notes were priced at 99.617 to yield 6.797% or 98 basis points more than comparable Treasuries. Moody's rates the offering Al, while Standard & Poor's rates it A-plus. Merrill Lynch & Co. was lead manager.

U.S. Leasing International sold $250 million of 6.50% notes due 2003. The noncallable notes were priced at 99.625 to yield 6.552%, or 71 basis points more than comparable Treasuries. Moody's rates the offering A2, while Standard & Poor's rates it A. Merrill Lynch & Co. was lead manager.

The Bank of New York issued $250 million of 6.50% subordinated notes due 2003. The noncallable notes were priced at 99.636 to yield 6.55%, or 72 basis points more than comparable Treasuries. Moody's rates the offering Baa1, while Standard & Poor's rates it A-minus. Goldman, Sachs & Co. was lead manager.

Federal Home Loan Mortgage Corp. sold $200 million of 5.37% notes due 1998 and priced initially at par. Noncallable for two years, the notes were priced to yield 22 basis points more than comparable Treasuries. Goldman, Sachs & Co. was sole manager.

Federal National Mortgage Association issued $150 million of 6.39% medium-term notes due 2003 at par. Noncallable for three years, the bonds were priced to yield 56 basis points more than comparable Treasuries. Lehman Brothers managed the offering.

Private Export Funding Corp. came to market with $150 million of 5.48% secured notes due 2003 at par. The noncallable notes were priced to yield 35 basis points more than comparable Treasuries. The notes have a five-year average life. Moody's and Standard & Poor's rate the offering triple-A. BT Securities was lead manager.

United Illuminating Co. issued $100 million of 6.20% notes due 1999 at par. The noncallable notes were priced to yield 100 basis points more than the Treasuries 6.375% debt of 1999. Morgan Stanley & Co. was lead manager.

Federal Home Loan Banks sold $100 million of 5.42% notes due 1998 at par. Noncallable for a year, the notes were priced to yield 25 basis points more than comparable Treasuries. Merrill Lynch managed the offering.

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