IBM Leads Jumbo-Deal Foray Into US Corporate Bond Market
08 Maggio 2012 - 4:53PM
Dow Jones News
Three jumbo-sized high-grade bond deals are hitting the U.S.
debt markets Tuesday as companies seek to participate in the
record-low yield environment.
It's often said that when IBM issues bonds, others follow,
knowing that Big Blue has a knack for achieving record-low yields.
So perhaps it's no coincidence that within a half-hour of
International Business Machines Corp. (IBM) reporting plans to
issue three- and seven-year bonds Tuesday morning, Berkshire
Hathaway (BRKB) and beverage company Diageo (DEO) each disclosed
their own three-part debt issues.
Each is "benchmark"-sized, which typically means at least $500
million per tranche. They could be considerably larger, pending
market appetite.
The flurry of jumbo deals comes at a time of record-low yields
for highly-rated bonds. The widely-watched Barclays U.S.
Investment-Grade Index finished last week at 3.25%, the lowest
level in data going back almost four decades. On Monday it ticked
up to 3.26%, the second-lowest rate on record.
When IBM last issued three-year bonds in February, it achieved
an all-time low coupon of 0.55%, according to Dealogic. Those bonds
last traded Monday at a spread over Treasurys of 0.37 percentage
point, yielding 0.737%, according to MarketAxess.
IBM's debt is rated Aa3 by Moody's Investors Service and A-plus
from Standard & Poor's and Fitch Ratings.
Berkshire and Diageo, each issuing through financing
subsidiaries, are both issuing five-, 10-, and 30-year bonds. The
Berkshire bonds are rated Aa2 by Moody's and AA-plus by Fitch,
while Diageo's bonds are rated A3 by Moody's and A-minus by S&P
and Fitch.
Berkshire is raising funds to retire up to $700 million of 4.75%
coupon notes due this year and to replace $1 billion of 4% notes
that matured last month.
IBM and Diageo are each borrowing for general corporate
purposes. According to Standard & Poor's LCD, this is Diageo's
first U.S. bond deal since 2010.
Among smaller issues, Penske Truck Leasing Co. (PTL.XX) is
readying a $750 million deal of three- and five-year bonds, and
Southern Co. unit Georgia Power said it would sell $500 million in
a two-part deal. All five deals are expected to price Tuesday.
-By Patrick McGee, Dow Jones Newswires; 212-416-2382;
patrick.mcgee@dowjones.com
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