Record amount of securities issued


NEW YORK -- Despite the recession, U.S. corporation sought huge amounts of cash from the public markets in the first quarter of 1991, with the volume bringing slightly increased fees to brokerages.

For the quarter, corporations issued a record $104.5 billion in domestic securities, up 30.7 percent from the $79.97 billion raised in the first quarter of 1990, according to the Securities Data Co., a New York research firm.

The determining factor in the push to raise capital was the decline of interest rates during the quarter, underwriters said. Many companies had been holding out for lower rates for as long as a year. When the drop came, they plunged into the markets.

"After the war began in mid-January without the world falling apart, and then when we got attractive absolute rate levels, there was a huge flow of deals," said Grant Kvalheim, a managing director on the capital markets desk at Merrill Lynch & Co.

Despite the success in the Persian Gulf, lower interest rates and a healthy stream of deals, fees for underwriters did not pick up substantially, although they rose enough to help the troubled financial services industry. Total fees for the quarter were $625.9 million, a 5 percent increase from the corresponding period last year.

Merrill Lynch was the biggest underwriter for the quarter. In 1988, Merrill moved past Salomon Brothers, which had long held the top spot in underwriting, and has been building a steady lead ever since.

For the quarter, Merrill underwrote $21.59 billion in domestic securities, giving it 20.7 percent of the market, according to Securities Data.

Goldman, Sachs & Co. was second, underwriting $13.53 billion for a 13 percent share. Next came the First Boston Corp. and Morgan Stanley & Co.

While a large amount of capital was being sought, much of the cash was raised through debt securities, even as the Dow Jones industrial average surged by about 10.8 percent since the beginning of the year.

Initial public offerings did particularly poorly, with only $2.7 billion issued, according to Securities Data. That is down 37 percent from the volume in the first quarter of last year, and a drop of 68.9 percent from the peak volume during the fourth

quarter of 1986.

The total for all equity issues was also down, with $6.8 billion in underwritings, compared with $7.1 billion a year earlier. But the figures indicate that with the uncertainties caused by the gulf war resolved, equity underwritings could strengthen.

More than half of the volume, about $3.4 billion, came in March alone, after the war, according to IDD Information Services, another New York research firm.

One exception to the surge in debt securities was "junk bonds," where the market collapsed early in the year. Indeed, some underwriters said that, with the threat of a junk bond-financed takeover unlikely, and with interest rates at a favorable level, the appetite for investment-grade debt climbed, fueled by the Federal Reserve's repeated cuts in interest rates.

In the first quarter, $41.8 billion in corporate debt was issued, up 36.1 percent from $26 billion a year ago. According to Securities Data, more than 88 percent of this debt was issued without call provisions, which would allow the issuers to repurchase the bonds at a fixed price, indicating that corporate treasurers are confident in this market.

After booming for many quarters, the markets for mortgage-backed and asset-backed securities showed tentative signs of slowing growth in the first quarter.

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