Capital Markets

Four Corporate Giants Hit the Bond Market

Eli Lilly, Coca-Cola, State Street, and Cargill weigh in with issues totalling nearly $7 billion.
Stephen TaubMarch 4, 2009

Four corporate giants raised nearly $7 billion in the bond market Tuesday, another reminder that capital is available to companies willing to pay a large premium. Most of the four – Eli Lilly & Co., Coca-Cola Co., State Street Corp., and Cargill Inc. – are using at least part of the proceeds to repay commercial paper or other debt.

In the largest sale, Eli Lilly issued $2.4 billion of debt in three parts: $1 billion of three-year notes priced to yield 3.586 percent, or 230 points over comparable Treasuries; another $1 billion of five-year notes, priced at 237.5 points over the benchmark; and $400 million in paper due in 2037, priced at just 240 points over Treasuries. The paper was rated A1 by Moody’s and AA by S&P. The pharmaceuticals concern said a portion of the net proceeds will go to repay commercial paper issued in connection with its acquisition of ImClone Systems Inc. in November, and to repay the $400 million resetable note due 2037. The remainder will be used for general corporate purposes.

Coca-Cola’s sale, in two parts, totalled $2.25 billion: $900 million in five-year notes, priced at 185 points over comparable Treasuries, and $1.35 billion of 10-year notes, priced at 205 points over the benchmark. They were rated Aa3 by Moody’s and A-plus by S&P and Fitch. The soft drink company also said proceeds to repay commercial paper, and for general corporate purposes.

Financial services company State Street sold $1.5 billion in notes guaranteed under the FDIC’s Temporary Liquidity Guarantee Program, priced to yield 2.198 percent, or just 88 points over comparable Treasuries. The notes were rated Aaa by Moody’s and Triple-A by S&P and Fitch. State Street said proceeds would be used for general corporate purposes, perhaps including the extension of credit to, or the funding of investments in subsidiaries. “The precise amounts and the timing of our use of the net proceeds will depend upon our subsidiaries’ funding requirements and the availability of other funds,” State Street said, adding that until the proceeds go for general corporate purposes, the company will reduce short-term debt with it, or make temporary investments. “We expect that we will, on a recurrent basis, engage in additional financings as the need arises to finance our growth, through acquisitions or otherwise, or to fund our subsidiaries,” it added.

Cargill sold $450 million of 10-year notes in the private placement market, according to Reuters. They were priced to yield 7.37 percent, or 450 basis points over comparable Treasuries, a pretty hefty spread given that the agribusiness company is rated A2 by Moody’s and A by S&P.

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