Capital Markets

Jumbo Offerings Spark Debt Markets

Morgan Stanley; General Electric Capital; Fedex; Equity Office Properties; Calpine.
Stephen TaubMarch 25, 2004

Five companies raised at least $12 billion from jumbo debt offerings over the past two days.

The underwriting brigade was led by Morgan Stanley, which on Tuesday issued $4 billion in 10-year global subordinated notes in a self-led offering. They were priced to yield 4.861 percent, or 115 basis points higher than comparable Treasurys. The notes were rated A1 by Moody’s and Single-A by Standard & Poor’s.

General Electric Capital Corp., the financing arm of General Electric Co., trotted out $3 billion of notes in a three-part sale, led by UBS Investment Bank, Lehman Brothers Inc., and Morgan Stanley. They included $1 billion of 2-year floating rate notes sold overseas and pegged to Libor, $1 billion in 2-year floating rate notes sold domestically and pegged to the federal funds rate, and $1 billion in 5-year notes priced to yield 3.159 percent, or 50 points over Treasurys. All of the paper was rated Aaa by Moody’s and AAA by S&P.

Fedex Corp. issued $1.6 billion of three-part debt in the private placement market, led by J.P. Morgan. It included $600 million in 1-year floating-rate notes, $500 million in 3-year notes and $500 million in 5-year notes. The notes were rated Baa2 by Moody’s and BBB by Standard & Poor’s.

Equity Office Properties issued $1 billion in 10-year notes, up from an originally planned $750 million. Led by J.P. Morgan and Citigroup Global Markets Inc., the paper was priced at 4.779 percent, 108 points over comparable Treasurys, and was rated Baa1 by Moody’s and BBB-plus by Standard & Poor’s.

And heavily indebted independent power producer Calpine Corp. announced that its wholly owned subsidiary Calpine Generating Co. (CalGen), formerly Calpine Construction Finance Co. II LLC, received funding on its $2.4 billion secured-term loans and secured-notes offering. The proceeds were used to repay about $2.3 billion in borrowings outstanding under an original $2.5 billion revolving credit facility, which was scheduled to mature in November. The company added that CalGen entered into an agreement for a $200 million revolving credit facility with a group of banks led by The Bank of Nova Scotia.

In other debt-related news, SK Telecom Co., South Korea’s biggest wireless carrier, issued $300 million of 7-year notes in the private placement market.

Meanwhile, Boeing Co. filed a shelf registration to periodically sell up to $1 billion in debt securities and common stock. The aerospace company said it plans to use the proceeds for general corporate purposes, which may include debt repayment, working capital, capital spending, and acquisitions.

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