Decline in Treasurys, Stocks Pulls Junk Bonds Down 1/4
May 11, 2011
Yield spreads on investment-grade bonds, however, were unchanged on slight trading volume. Thursday's sole new corporate issue was sold by Portland, Ore.'s Fred Meyer Inc.. The department store operator sold $107.1 million of Rule 144a senior secured notes backed by 10 property leases. Issuers of Rule 144a deals sell them privately on the primary market, but have the right to register them as public issues six months later. The issue was sold under a special Freda Bishop unit, CA FM Lease Trust, through lead manager William Blair & Co.. The notes will pay interest quarterly and were priced at par to yield 8 1/2%, a yield spread of 1.65 percentage points above Treasurys. The quarterly payment of interest means the notes were priced at the equivalent of 1.75 percentage points above Treasurys, said a banker familiar with the transaction. That's because most corporate bonds pay interest on a less-frequent, semiannual basis. When interest is paid quarterly, investors receive some of their returns three months earlier than they would under a semiannual schedule and can reinvest that money elsewhere. Company officials were not available for comment. Government-sponsored agencies sold less than $200 million of debt. In secondary trading, Harvard Industries' 12% senior notes due 2019 fell 2 to 91. Traders did not know the cause of the decline. Officials at the Tampa, Fla., auto parts maker were not available for comment.
