Bear Stearns Bond Sale Oversubscribed

Bear Stearns raised about $1 billion Thursday afternoon with an enthusiastically received surprise sale of 10-year bonds. On Wednesday, Bear shares gained 8% on speculation the firm was in talks to sell a 20% chunk of itself to an outside investor (full story). Bear chose to capitalize on that momentum and put $1 billion worth of bonds up for sale, for which it received upward of $3 billion in orders. According to TheStreet.com, the bonds will be priced at 190 basis points over comparable 10-year Treasuries. Last week, Bear posted a 61% drop in Q3 earnings on steep retreats in the bond and structured finance markets (full story), and two of its hedge funds fell apart over the summer after making bad bets in the mortgage market (full story). Bear is now in money-raising mode, either through bond sales or through involvement of strategic partners. Despite the credit crunch, corporate bonds are proving extremely popular this month. "It's basically a food fight for anything that hits the market," said a money manager quoted by TheStreet.com. Bankers for Kohlberg Kravis Roberts have sold $9.4 billion of loans to be used for the $26 billion buyout of First Data Corp. -- "a significant event on the road back to normality," said Henderson Global Investors money manager John Pattullo, though the underwriters had to offer the loans at a 3-4% discount to spur demand.

Sources: TheStreet.com, Bloomberg
Commentary: Bear Stearns in Talks to Sell 20% Stake – NY Times • Three Reasons To Refrain From Buying Investment Banks • First Data's Loan Deal Oversubscribed - Reuters
Stocks/ETFs to watch: BSC, FDC. Competitors: GS, MER, LEH. ETFs: IAI
Earnings call transcript: Bear Stearns F3Q07

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