Capital Markets

Larger-Than-Planned Debt Offerings

Tenet Healthcare; International Lease Finance; Caterpillar Finance; Pricoa Global Funding.
Stephen TaubJune 17, 2004

While the market braces itself for a rise in interest rates, possibly as early as June 30, a number of companies have trotted out large debt offerings in the past week or so.

Many of the companies that issued new paper raised much more than they had originally planned. Perhaps they were buoyed by the fact that a week ago, taxable bond mutual funds reported net cash inflows of $47 million.

For example, earlier this week financially troubled Tenet Healthcare Corp. raised $1 billion — double what it reportedly was looking to borrow — from the sale of 10-year high-yield notes in the private placement market. They were priced to yield 10.25 percent, or 556 basis points over comparable Treasurys; the issue features a make-whole call of 0.5 percentage point over Treasurys, according to reports.

Standard & Poor’s affirmed Tenet’s B-minus senior unsecured rating, while maintaining its negative outlook. Tenet also repurchased $450 million of outstanding debt that will mature in 2006 and 2007. It now has about $1.1 billion in cash on its balance sheet, and its next significant debt maturity is 2011, according to reports.

International Lease Finance Corp., a unit of American International Group Inc., issued $500 million in 5-year notes, led by Citigroup Global Markets Inc., Credit Suisse First Boston, and Banc of America Securities LLC. This offering was increased from an originally planned $300 million. The paper was priced to yield 4.86 percent, 95 basis points over comparable Treasurys, and was rated A1 by Moody’s and AA-minus by S&P.

Caterpillar Finance, the financing arm of heavy-equipment maker Caterpillar Inc., raised $650 million from the sale of 5-year medium term notes, upsized from a planned $350 million. The A2/A issue was priced to yield 4.559 percent, or 67 points over its benchmark.

And Pricoa Global Funding I, a unit of life insurer Prudential Financial Inc., sold $400 million in 4-year notes in the private placement market, up from an originally planned $300 million. The issue was backed by a Prudential Insurance Co. funding agreement.

Other issuances:

  • Genworth Financial Inc., the insurance company spun off from General Electric Co., raised $1.9 billion of senior unsecured debt in four parts.
  • Stater Brothers Holdings Inc., operator of a California-based grocery chain, sold $700 million of senior notes in two parts in the private placement market.
  • General Electric Co.’s General Electric Capital Corp. plans to sell $2 billion of floating-rate notes in a two-tranche deal on Thursday, according to Reuters, citing a syndicate source. The deal will feature 3-year and 5-year notes, led by Banc of America Securities, HSBC Securities, and Merrill Lynch.

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