Capital Markets

AT&T, Three Others Are as Good as Their Bonds

More than $4 billion of paper is sold — although at hefty premiums — with Philip Morris, Duke Energy Carolinas, and Georgia Power joining in.
Stephen TaubNovember 13, 2008

At least four companies sold more than $4 billion of paper on the bond market, with AT&T leading the way on Wednesday with $1.5 billion of 5-year notes. The companies paid a pretty premium for the privilege, of course.

AT&T’s notes were priced to yield 6.741 percent, or 437.5 basis points over comparable U.S. Treasuries, according to Thomson Reuters. Credit Suisse, JPMorgan, Royal Bank of Scotland, and Wachovia were the lead managers. When the telecom giant last sold bonds in May, the spread was a much-narrower 168 basis points over Treasuries. Fitch Ratings assigned an ‘A’ rating to the AT&Ts notes, saying that the company “has the financial flexibility to maintain leverage in a range appropriate for the current rating category.”

Elsewhere, Philip Morris International sold $1.25 billion of five-year notes, pricing the paper at a yield of 6.981 percent, or 462.5 basis points over Treasuries. Those notes were rated A2 by Moody’s, Single-A by Standard & Poor’s and A-plus by Fitch. Citigroup Global Markets, Deutsche Bank, and Goldman Sachs were the joint book-running managers.

Duke Energy Carolinas LLC, a unit of Duke Energy Corp., sold $900 million of first and refunding mortgage bonds in a two-part sale, according to Reuters. It sold $400 million of five-year priced to yield 5.804 percent, or 345 basis points over Treasuries, and $500 million of 10-year notes priced to yield 7.041 percent, or 340 points over comparable Treasuries, according to the wire service. They were rated A2 by Moody’s and Single-A by S&P.

Georgia Power Co., a unit of Southern Co., sold $400 million of five-year senior notes, with the notes priced to yield 6.016 percent, or 360 points over Treasuries, the wire service said. They were rated A2 by Moody’s, Single-A by S&P and A-plus by Fitch. Banc of America Securities, Barclays Capital and Goldman Sachs were the joint bookrunning managers.

Meanwhile, Boston Properties filed a shelf registration to sell up to $2 billion in debt securities, common and preferred stock, warrants, depositary shares and contracts. The real estate investment trust plans to use the proceeds for buying and developing properties, to repay debt, for capital expenditures, and working capital.

New issuance of corporate bonds could pick up in the future, as investors start to be rewarded for their purchases. Bloomberg News points out that October sales of corporate bonds climbed as much as 10.8 percent since they were issued, citing Trace, the bond-pricing service of the Financial Industry Regulatory Authority