PEFCO SELLS NOTES VIA J.P. MORGAN SECURITIES
Private Export Funding Corp, PEFCO, is
offering 150 mln dlrs of secured notes due 1994 with an 8.60
pct coupon and par pricing, said J.P. Morgan Securities Inc,
acting as lead manager of its first corporate debt deal.
    "To our knowledge, this is the first time that an affiliate
of a bank holding company has been a manager of a corporate
bond offering in the U.S.," a spokesman for J.P. Morgan and Co
Inc said.
    J.P. Morgan Securities is an affiliate of J.P. Morgan and
Co, the fifth largest bank in the U.S.
    The J.P. Morgan spokesman explained that because the PEFCO
notes are guaranteed by the U.S. government, the securities
affiliate was not prohibited by the Glass-Steagall Act from
underwriting the issue.
    Indeed, Bankers Trust Co and Citicorp Investment Bank,
which are affiliates of Bankers Trust New York Corp and
Citicorp respectively, were co-managers of the PEFCO offering.
    Passed by Congress in 1933, Glass-Steagall bars commercial
banks from owning brokerage firms and engaging in such
investment banking activities as underwriting corporate
securities or municipal revenue bonds.
    Last year, several major U.S. banks formed investment
banking affiliates and applied to the Federal Reserve Board for
authorization to offer commercial paper and underwrite and
trade municipal revenue bonds and some forms of mortgage-backed
securities.
    J.P. Morgan Securities received permission from the Fed
several weeks ago for these activities, the spokesman said.
    But the Securities Industry Association, a trade group of
investment banking firms, appealed the decision. J.P. Morgan
also appealed because it believed the Fed placed too many
restrictions on the bank's affiliate, the spokesman said.
    "The Securities and Exchange Commission got a stay, so we
are not engaging in those activities," the J.P. Morgan
spokesman said.
    "We are perfectly eligable to underwrite this offering. We
are endeavoring to prove that there is nothing mysterious about
this business," the spokesman said.
    He added, "Ruling off certain markets does not serve the
public policy.
    J.P. Morgan Securities was formed in April 1986 with
capitalization of 250 mln dlrs, the spokesman said. At year-end
1986, the firm had 261.5 mln dlrs of capital.
    Dillon, Read and Co Inc, Merrill Lynch Capital Markets and
Salomon Brothers Inc also served as co-managers of the PEFCO
deal.
    The issue's yield was 50 basis points over comparable
Treasury securities. The notes are non-callable for life. A
top-flight AAA rating by Moody's and Standard and Poor's is
anticipated.
    The gross spread is 5.75 dlrs, the selling concession is
3.50 dlrs and the reallowance is two dlrs.
    The spokesman said J.P. Morgan Securities was a member of
an underwriting syndicate for a Sallie Mae issue last year.
 Reuter
