Capital Markets

Corporates Go on Borrowing Binge

Companies are hungry for debt, and the week isn't over yet.
Stephen TaubMay 7, 2008

Amid a weak economy, underwriting of corporate bonds continues to be strong. During the first two days of this week, at least $17 billion worth of debt and preferred securities has come to market, mostly from finance companies or finance arms of non-finance companies.

The borrowing binge was led by British-based GlaxoSmithKline Capital, a unit of drug maker GlaxoSmithKline, which Tuesday sold $9 billion in debt in four parts, reported Reuters, citing International Financing Review. This included $2.75 billion of 10-year notes, $2.75 billion of 30-year bonds, $2.5 billion of five-year notes and $1 billion of two-year floating-rate notes. The paper was rated A1 by Moody’s, A-plus by Standard & Poor’s and AA-minus by Fitch.

Berkshire Hathaway Finance Corp., a unit of Berkshire Hathaway Corp., sold $2 billion of two-part notes in the private placement market, according to Reuters. The Berkshire offerings comprised $1 billion of five-year notes, priced to yield 150 basis points over comparable Treasuries, and $1 billion in 10-year notes priced at 155 points over Treasuries. It was rated Aaa by Moody’s and AAA by S&P.

Meanwhile, Citigroup sold $3 billion of 10-year notes priced to yield 6.125 percent, or 230 basis points over Treasuries, said the report. In addition, it sold $2 billion in non-cumulative perpetual preferred securities. The size of the deal was increased from an originally planned $300 million, said the newswire.

Also, Bank of America sold $2.7 billion in debt in two parts, reported Reuters. That offering included $1 billion of two-year floating-rate notes and $1.7 billion of 2-year floating-rate notes.

Over in the oil patch, ConocoPhillips sold $1.5 billion in debt in a three-part offering, said the report. It included $400 million of 5-year notes, $500 million of 10-year notes and $600 million of 30-year bonds.

Other deals are reportedly close to coming to market this week. In Europe, for example, Volkswagen Credit Inc. USA, guaranteed by German carmaker Volkswagen, is planning $1.9 billion of 3-year bonds, said the wire service, citing an official at one of the banks managing the sale. In addition, GE Capital European Funding plans to sell a seven-year benchmark euro bond, according to reports.

Other companies planning to bring debt to the public markets this week include Duke Realty and Transalta Corp.