Homebuilders and Buffett Bring Home the Bacon


Last week's $23 billion worth of corporate bond sales in the U.S. wasn't exactly a barn-burner, but it was enough to make last month the busiest January on record for corporates.

A trio of homebuilders were in the markets last week. DR Horton , Lennar , and Beazer issued $700 million, $450 million, and $200 million in new debt, respectively. DR Horton is using the money for general corporate purposes, Lennar for working capital and general corporate purposes, and Beazer for general corporate purposes and note redemption.

Berkshire Hathaway led the borrowers with $2.6 billion spread over three-, five-, 10-, and 30-year paper. Warren Buffett and friends are using the new money to repay $1.2 billion in floating-rate notes and $1.4 billion in bonds that mature this month.

General Mills raised $1 billion at a bake sale featuring three-year fixed and floating-rate notes, along with 30-year paper. The money will go to repay commercial paper with an interest rate of about 0.4%. It's curious that General Mills is tapping the bond market at a higher average rate to pay off that paper.

An issue of $500 million in three-year paper set sail at Carnival. The money will be used to "repay two floating rate debt facilities, one in whole and one in part." The 1.2% coupon rate on the new paper is a little less than the LIBOR plus 160 basis points Carnival is paying on the debt facilities.

Sabine Pass Liquefaction, a subsidiary of Cheniere Energy Partners , tapped the high-yield market for $1.5 billion in eight-year paper. Sabine Pass is using the money "to pay capital costs in connection with the construction of the first two LNG liquefaction trains at its facility in Cameron Parish, Louisiana." It sounds like there might be a few jobs in the pipeline with this deal.

Netflix priced $500 million for eight years in the high-yield market. Nearly half the money will be used to refinance higher-rate debt, while the rest will go toward general corporate purposes.

Of the companies mentioned, Cheniere Energy Partners warrants a closer look. The valuation metrics all look expensive, but the partnership is positioned to take advantage of liquefied-natural-gas exports when that market grows. It's speculative but worth a spot on My Watchlist.

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