Capital Markets

Counting on the Full Faith and Credit of the U.S.

BofA and GE plan to take advantage of the FDIC's guarantee program. Medtronic and Tyson Foods issue debt on their own.
Stephen TaubMarch 9, 2009

Two prominent financial giants are looking to raise more than $16 billion in government-backed bonds.

In one offering, Bank of America launched an $8.5 billion government-backed bond sale, which will be sold in three parts, according to Reuters. The offering is being made under the Temporary Liquidity Guarantee Program, which was created by the Federal Deposit Insurance Corporation to boost liquidity in the banking system by guaranteeing newly issued senior unsecured debt of banks, thrifts and some holding companies.

Bank of America is seeking to raise $4 billion of 1.5 year floating-rate notes, $2 billion of three-year fixed-rate notes, and $2.5 billion of three-year floating-rate notes, according to the wire service.

Meanwhile, GE Capital, the finance arm of General Electric Co., plans to sell $8 billion in bonds backed by the FDIC, in a four-part sale, according to a separate Reuters report. The GE Capital sale includes $4 billion in two-year fixed rate notes, $1 billion in two-year floating rate notes, $1.5 billion of three-year fixed rate notes, and $1.5 billion in three-year floating rate notes.

According to other reports, GE Capital said on Friday that it was offering to buy back up to $1.46 billion in bonds.

Elsewhere, Medtronic Inc. plans to sell $1.25 billion of debt in a three-part offering. It plans to sell five-year notes, 10-year notes and 30-year bonds. The medical technology company said it will use the proceeds for general corporate purposes, including repaying a portion of outstanding commercial paper. As of February 27, Medtronic had about $2 billion of commercial paper outstanding, which had a weighted average interest rate of approximately 0.75 percent and a weighted average maturity of roughly 64 days.

Meanwhile, Tyson Foods Inc. said it entered into a $1 billion senior secured credit facility with JPMorgan Chase Bank, N.A. The new credit facility is secured by the company’s cash, accounts receivable and inventory, and is guaranteed by substantially all of the corporation’s domestic subsidiaries.

The new credit line replaces the company’s previous revolving credit facility for which the company and some of its material subsidiaries pledged substantially all their assets as collateral.

In addition, Tyson said it closed its previously announced offering of $810 million of 10.50 percent senior notes due 2014. The company expects to use the proceeds to repay borrowings and terminate commitments under its accounts receivables facility, repay and/or refinance other indebtedness, and use it for other general corporate purposes.

“Given the current financial market, we believed it was prudent for us to proceed with these measures now,” said Dennis Leatherby, executive vice president and chief financial officer for Tyson Foods. “The offering and new credit facility provide Tyson with continued financial flexibility, giving us the option of paying off some existing debt early as well as funds for future financing needs.”