Financials Take the Largest Slice of the Financing Pie
Corporate bond markets came back from the holidays with a roar. There were over $50 billion in new U.S. dollar issues last week. The biggest players by far were banks, automaker credit arms, and other financials with over $30 billion of the total.
Leading the charge was Bank of America with $6 billion spread over new three-, five-, and 10-year paper. Typical for banks, there wasn't anything beyond "general corporate purposes" for use of proceeds in the SEC filing.
Berkshire Hathaway's finance corporation sold $500 million split between five- and 10-year notes. Mr. Buffett and Co. are using the money to redeem some maturing paper.
The table below lists the financial borrowers, their home countries, and how much they put on their credit cards.
Bank of America
Berkshire Hathaway Finance
Commonwealth Bank of Australia
General Electric Capital
Royal Bank of Canada
Sumitomo Mitsui Banking
Toyota Motor Credit
Ford Motor Credit
Not all the borrowers were financials. Here are profiles for a few more of the deals.
MarkWest Energy piped in $1 billion with a 10.5-year note sale. A little over half the money will go toward a tender offer for higher rate paper. The rest will go to "fund our capital expenditure program, for general working capital and for other partnership purposes."
Windstream dialed up $700 million in 10-year notes at 6.375%. The money will finance a tender offer for $650 million of 8.875% notes. The company should save about $13 million per year in debt service.
Sticking with a refinance theme, Staples hit the easy button for a total of $1 billion in five- and 10-year notes to cover a tender offer for higher rate notes . The deal should cut its debt service expense by about $35 million per year.
Companies with good credit, and some with not-so-good credit, continue to have little trouble borrowing at very low rates and are able to reduce debt service costs when existing paper matures or by buying back existing higher coupon debt.
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