3rd UPDATE:High-Grade Cos, Foreign Banks Offer $16.5 Billion In Bonds
By Romy Varghese Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Investment-grade companies and foreign banks offered $16.5 billion in new bond deals Tuesday as they raise funds for their operations and to repay debt.
Companies alone were marketing $9.75 billion. Biotechnology giant Amgen Inc. (AMGN) was in the market with $2 billion in notes. McDonald's Corp. (MCD) sold $750 million in notes due in 10 and 30 years, and FedEx Corp. (FDX) offered $1 billion in five- and ten-year maturities. Reed Elsevier (ENL) sold a $1.5 billion deal, with the proceeds slated to help repay its purchase of Choicepoint. Princeton University placed $1 billion of notes with investors.
In addition, Goldman Sachs (GS) priced $3.5 billion in short-term notes backed by the Federal Deposit Insurance Corp. Such guaranteed debt, which allows financial institutions to raise funds cheaply, had dominated supply of investment-grade bonds last month.
Besides U.S. corporations, others tapping the bond market were the Province of Ontario, Australia's Macquarie Bank, the African Development Bank and Austria's Osterreichische Kontrollbank AG, or OKB. Those deals totaled $6.75 billion.
McDonald's was expected to see good demand for its bond deal since its business model is one that holds up during tough economic times, said William Larkin, portfolio manager at Cabot Money Management. "There's incredible demand for the more stable, S&P 500 names," he said. "They're going to market at a good time."
Indeed, risk premiums on the 30-year note were at 270 basis points, according to IFR. That's not much of a concession compared to an existing 6.3% note due 2037, which has a risk premium of 263 basis points over comparable Treasury yields, according to online trading platform MarketAxess.
Meanwhile, lower-rated firms, or those that are dependent on the economy, would have to pay higher costs to entice investors. For instance, FedEx launched its 10-year note paying an 8% yield, according to IFR.
Higher-risk premiums, or spreads, may be seen with a deluge of new bonds, wrote Citigroup analysts in a note. Also, impending fourth-quarter earnings reports will pressure credit markets as poor corporate earnings may not have been fully priced in, they wrote.
"There is still quite a bit of money to be put to work, but investors' cash reserves are being slowly exhausted," the note said.
-By Romy Varghese, Dow Jones Newswires; 201-938-4287; romy.varghese@dowjones.com
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Publié le 13 janvier 2009 Copyright © 2009 Dowjones
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