Magazine article American Banker

NBD and BankAmerica Tap the Markets with Note Offerings Totaling $350 Million

Magazine article American Banker

NBD and BankAmerica Tap the Markets with Note Offerings Totaling $350 Million

Article excerpt

Following robust earnings reports for the first quarter at NBD Bancorp and BankAmerica Corp., the banks have came to market with $350 million of bonds.

Strong first-quarter earnings, the expectation of a soft landing, and the relative dearth of corporate bond issuance have all made this a good time to issue new bank debt.

"Since April, when bank earnings were reported, there has been more than $2 billion of new issuance," said Ann Robinson, a fixed- income analyst at Bear, Stearns and Co. "It's a nice time for sellers. Everything is pretty euphoric in the view of the markets."

The market has focused on the positives, she said.

The two new bank bonds have structural elements that differentiate them from the typical long-term issue: 10-year subordinated noncallable debt.

In a Lehman Brothers-led deal, NBD brought $200 million of 12- year subordinated notes to market on Wednesday, with a coupon of 7.125% and a yield to maturity of 7.18%. The notes, rated A1 by Moody's, A-plus by Standard & Poor's, and AA-minus by Duff & Phelps, came to market priced at 65 basis points over comparable Treasuries. The price has since widened with the rest of the market to about 70 basis points over Treasuries.

"A 12-year issue is unusual in this day and age," said David Hendler, a fixed-income analyst at Smith Barney, noting that a 10- year term is the rule.

Nonetheless, analysts said the tenure is not unprecedented, and that in fact banks prefer longer-term issues because of the slower amortization schedule. …

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