Offering Bonds On the 'Net.

• Author: Marshall, Jeffrey
• Position: Brief Article

Investment bank bond departments, many of which have struggled in recent years, have a new threat to contend with: the Internet. In mid-August, Dow Chemical Co. auctioned a $300 million, five-year bond offering online -- becoming the first industrial corporation to use an online "Dutch auction" that allows investors to bid in real time for both the size and price of bond transactions.

The two-hour auction was facilitated by the launch of WR Hambrecht + Co.'s OpenBook (www.openbook.com), an internet-based Dutch auction platform for the investment-grade bond market. OpenBook "gives investors and issuers a more equitable and consistent market for bond offerings," said Bill Hambrecht, CEO of WR Hambrecht. "Institutional investors get equal access and greater price stability, while issuers benefit from a broader investor base and a more stable after-market. Additionally, everyone can view the price discovery process."

Dow was "pleased with the results," said Geoffery E. Merszei, vice president and treasurer. "Providing investors with the ability to directly establish the market clearing price is...