, timing is everything.
The struggling brokerage house raised at least $1 billion this afternoon with a surprise sale of 10-year bonds. The sale, which was met by strong demand in the bond market, comes just a day after Bear shares surged nearly 8% on rumors that the Wall Street firm was near a deal to bring in a big outside investor. One report said Bear has been talking with billionaire value investor Warren Buffett.
On Thursday, Bear Stearns took advantage of that momentum and some strong demand in the corporate bond market to raise some money. Sources say the deal drew more than $3 billion in orders for $1 billion worth of bonds, though it may be upsized.
The bonds are expected to be priced at 190 basis points over comparable 10-year Treasury bonds. Investors say that is attractive for the senior bonds, relative to subordinated Bear Stearns bonds and comparable
debt, both of which traded recently at about 175 basis points over Treasuries.
The move comes just a week after Bear posted a 61% drop in third-quarter earnings, hit by sharp declines in the bond and structured finance markets that the firm specializes in. Bear has been in dire straits ever since two of its in-house hedge funds collapsed this summer under the weight of bad mortgage-market bets, and investors have been speculating that the firm badly needs a capital infusion or a deep-pocketed partner if it is to continue growing.
Though much has been made of the credit crunch afflicting some short-term debt markets, it has been a record month of issuance in the corporate bond market, with $84 billion of new deals in September.
"It's basically a food fight for anything that hits the market," says one manager.
In keeping with TSC's editorial policy, Rappaport doesn't own or short individual stocks. She also doesn't invest in hedge funds or other private investment partnerships. She appreciates your feedback. Click
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