8/8 Barron's: Trading Points
WorldCom's Expanded Bond Deal Rings In A Record $6.1 Billion
By Jacqueline Doherty
Summer can officially commence for the corporate bond market now that
WorldCom's megadeal is done. But for those of you who can't get enough of
WorldCom -- and apparently there were more than a few, given the offering was
upped to a record-busting $6.1 billion from the $3-$4 billion originally
planned, here's a recap.
Even with the boost in its size, the WorldCom bonds moved up in price after
their first day of trading Friday. The $1.5 billion three-year debt, which was
priced at a yield 70 basis points, or hundredths of a percentage point, above
Treasuries on Thursday, was firmed up to be quoted at a narrower spread of 66
basis points Friday. Similarly, the $600 million of five-year notes, priced
originally 83 basis points above Treasuries, traded at 80 basis points over.
The $2.25 billion of seven-year debt was quoted at 91 basis points Friday,
three basis points tighter. And the $1.75 billion of 30-year bonds were quoted
at 132 basis points over on Friday, also three basis points tighter.
Of course, one day of strong trading doesn't say a lot. But it doesn't hurt
either. There was more than $10 billion in demand for the WorldCom deal,
according to Geoffrey Coley, a managing director at Salomon Smith Barney, which
lead-managed the offering. So while Cathy Bunting, portfolio manager of the New
England Bond Income Fund, requested $50 million in WorldCom bonds, she was able
to receive only $35 million.
The massive WorldCom deal elbowed a few other companies out of the primary
market. A number of new issues were postponed after corporate bond spreads
widened in anticipation of the WorldCom deal. But those issuers aren't expected
to return to the market for a second attempt until September. So the new-issue
market should be light in coming weeks, giving investors some time at the beach
to prepare for the next wave of deals this fall.
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