New Optimism About Crown?

January 25, 1995|By Kim Clark | Kim Clark,Sun Staff Writer

Crown Central Petroleum Corp. said yesterday that it had completed the sale of $125 million of senior notes -- more than it originally planned -- as investors appeared to signal some optimism about the loss-plagued oil company.

Demand for the high-yield bonds was so great that the Baltimore-based refiner and marketer increased the planned $100 million offering by 25 percent. The notes promised to pay buyers 10.875 percent a year over their 10-year life, but because they were sold at a slight discount, they will actually pay almost 10.92 percent.

Mihoko Manabe, an analyst for Moody's Investors Service in New York, said she gave the notes a Ba3 "junk" rating because Crown has a history of losses and she expects its "profitability will continue to be depressed" because the company must spend millions of dollars to meet new environmental regulations.

Crown is one of Maryland's 10 largest public companies and employs about 260 in the state. It owns and operates two refineries in Texas and owns about 400 gas stations and convenience stores in seven mid-Atlantic and southeastern states.

The company, which last made money in 1990, has reported losing $25.2 million in the first nine months of 1994.

But since the bonds were offered Jan. 17, the company's stock has risen dramatically. Class A shares have gained nearly 23 percent, jumping from a 52-week low of $12 Jan. 17 to $14.75 yesterday. Yesterday alone, the shares gained $1.125.

Its Class B shares also have risen, from a low of $11.625 Jan. 16 to $14.125 yesterday. The shares closed up 75 cents in American Stock Exchange trading yesterday.

William Hyler, who follows Crown's shares for Oppenheimer & Co., said he believed investors were starting to "bottom fish" for Crown shares, which have fallen about $10 in the last year.

If the company sold all its assets tomorrow, the gas stations alone would be worth more than $12 or $13 a share, he said. "You are getting their refineries for free."

Although he said he thinks the company still has some tough slogging, he remains hopeful. "We think the refining business is going to get better. We know their retail [outlets] make money."

Crown said it would use the money to pay off $55 million of bonds that were starting to come due. Crown will have to pay a premium of about $3.3 million to pay those bonds off early, said chief financial officer John Wheeler.

Crown also will pay off another $15 million of debt and use the rest -- approximately $51 million -- for general corporate purposes, he said.

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