The Martin Luther King Jr. holiday thinned trading and syndicate desks yesterday.
"It ain't happening," one head of high-grade trading said. "Hopefully tomorrow we'll bring back the players, but today they're all MIA."
Both high-grade and high-yield bonds ended unchanged in secondary trading yesterday. High-grades should open firmer today, however, because government bond futures gained 3/8 point yesterday, traders said.
In yesterday's high-yield news, Burlington Industries Equity Inc. announced plans for an initial public offering as part of recapitalization plan. Under the plan, the company will refinance or retire all of its outstanding high-yield debt securities, a company release says.
Short of such a plan, Burlington would face a cash crunch between 1993 and 1995, caused by new cash interest payments due on its outstanding debt and bank loans amortizing, Phelps Hoyt, a vice president at Duff & Phelps/MCM Investment Research Co. said.
Through the initial public offering, Burlington will sell close to 85% of the company, Mr. Hoyt said.
"The current equity holders think 15% of something is better than 100% of nothing," he said.
While nothing is forcing Burlington to do the stock offering now, current low interest rates and market receptivity to such offerings make it a fairly opportune time, Mr. Hoyt said.
Burlington filed a registration statement with the Securities and Exchange Commission to issue 57 million common shares. It expects to sell the shares for $14 to $16 each. Burlington, not existing shareholders, will sell the stock.
Morgan Stanley & Co.; Donaldson, Lufkin & Jenrette Securities Corp.; First Boston Corp.; and Kidder, Peabody & Co. will manage the offering.
Also as part of the recapitalization, Burlington has received commitments from Chemical Bank; Bankers Trust Co.; Bank of Nova Scotia; and NationsBank of North Carolina, N.A. for $1 billion of a proposed $1.25 billion bank facility. The registration statement said those banks have agreed to try to assembly a syndicate that would provide the remaining $25 million.
Burlington would use the proceeds from the stock offering and the funds from the bank facility in several ways. It would buy back all $323.7 million, or $359.9 million principal amount at maturity, of its senior debentures due 2002 and its 13.875% series A senior subordinated notes due 1986.
Burlington also would make tender offers for all of its $535.5 million, or $625.4 million principal amount at maturity, of its 13.875% series B senior subordinated notes due 1996; 14.25% subordinated debentures due 1999; series B junior subordinated discount debentures due 2003; and 16.875% senior discount debentures due 2004.
Burlington also would redeem all $99.5 million principal amount of its senior floating rate debentures due 1999 and refinance all of its existing bank debt.
In addition, Burlington plans to contribute $99.5 million to the Burlington Industries Inc. Employee Stock Ownership Plan Trust. That contribution would enable the subsidiary's trust to prepay the remainder of a 1989 loan that it took out to acquire an equity interest in the company.
Burlington also would exchange 7,722,038 shares of its 9.5% preferred stock for 3,534,395 shares of its common stock. The preferred stock is currently held by Morgan Stanley Group Inc. and Bankers Trust New York Corp.
Morgan Stanley was the lead investor in a 1987 leveraged buyout that took Burlington Industries private, according to Dick Windham, a company spokesman. Bankers Trust and Equitable also were investors in that LBO, he said.
Elsewhere in high-yields market, two closed-end funds -- First Boston Strategic Investment Inc. and First Boston Income Fund Inc. -- announced plans to increase the percentage of junk bonds in their portfolios.
Both funds cited the "dramatic decline in interest rates over the last few months" as the reason.
The funds decided on the increases Jan. 16 at separate meetings of their Board of Directors, a First Boston spokeswoman said.
First Boston Income Fund that day approved an amendment to permit a "more dynamic" asset allocation between junk bonds and mortgage-backed securities, while First Boston Strategic decided on a similar path involving junk bonds, mortgage-backed securities, and international bonds.
"The historically low leve of interest rates has very unfavorable effects on the yields of mortgage-backed securities, while the prospect of gradual economic recovery makes jund bonds relatively more attractive," releases for both funds said.
First Boston income's directors eliminated a 50% limit on junk bonds. No increase exceeding 50% would occur before Feb. 3, a release said. No other limit was set.
Meanwhile, First Boston Strateic Income decided to increase the fund's junk bond investments from the current 45% level. The exact amount of that increase is undetermined as yet, but no increase exceeding 55% would occur before Feb. 3, a fund release said.
