Who's Tapping Corporate Credit Markets?
New, high-grade bond issues in the U.S. totaled more than $17 billion last week. Add in lower-quality bond issues, and the total tips in at more than $20 billion. Who's been taking advantage of today's low interest rates, and what are they doing with all that money? The following companies accounted for nearly $13 billion of the week's new high-quality debt.
Company | Amount | Coupon Rate | Maturity |
|---|---|---|---|
Becton, Dickinson (NYS: BDX) | $1.5 billion | 1.75%-3.125% | 5 and 10 years |
Boston Properties* (NYS: BXP) | $850 million | 3.7% | 7 years |
Cigna (NYS: CI) | $2.1 billion | 2.75%-5.375% | 5, 10, and 30 years |
Colgate-Palmolive (NYS: CL) | $1.0 billion | 0.6%-2.45% | 3, 5, and 10 years |
Dow Chemical (NYS: DOW) | $2.0 billion | 4.125%-5.25% | 10 and 30 years |
Mattel (NYS: MAT) | $600 million | 2.5%-5.45% | 5 and 30 years |
Toronto-Dominion Bank (NYS: TD) | $1.85 billion | Floating -2.375% | 2 and 5 years |
Xstrata Finance | $3.0 billion | 2.85%-6% | 3, 5, 10, and 30 years |
Sources: Reuters, SEC filingsm and Digital Look.
*Boston Properties' debt issued by operating partnership Boston Properties, LP.
In most cases, public companies are required to file SEC documents with details of the bond offering, including how the money will be used. Unfortunately, those details often don't go into any detail.
Boston Properties is using the money to repurchase exchangeable notes. Cigna's new debt is being used to fund its acquisition of HealthSpring. Colgate-Palmolive is paying off euro-denominated debt. Dow Chemical is refinancing debt. Mattel is borrowing to pay for its acquisition of Hit Entertainment.
Becton, Toronto-Dominion, and Anglo-Swiss mining giant Xstrata didn't provide any details beyond "general corporate purposes."
Becton, Colgate-Palmolive, Mattel, and Toronto-Dominion all issued debt with coupon rates below their dividend yields. In theory, these companies could improve cash flow by borrowing and using the money to repurchase shares.
It's easy for a stock investor to ignore the bond market. But a look at a company's credit rating, capital structure, and plans for new debt should be part of your Foolish research.
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At the time thisarticle was published Fool contributor Russ Krull doesn't own shares in any company mentioned.Motley Fool newsletter serviceshave recommended buying shares of Mattel and Becton. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fooldisclosure policyhas never tapped the bond market.
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