Companies Borrowing Billions

Last week's $29 billion in new corporate bond issues pushed September's total past $100 billion. Borrowers came from insurance, shipping, international financials, pharmaceuticals, and energy. Here's a rundown of a few borrowers and what they plan to do with all that money.

The week's biggest borrower was Watson Pharmaceuticals (NYSE: WPI  ) , with $3.9 billion spread across five-, 10-, and 30-year issues. Watson -- with an $11 billion market cap -- will be putting the new money toward its 4.25 billion euro acquisition of Actavis.

NBC Universal, majority-owned by Comcast (Nasdaq: CMCSA  ) , floated $2 billion in 10- and 30-year paper. The money will be used to redeem a little more than $400 million of higher-rate paper and "for working capital and general corporate purposes, which may include funding a portion of the anticipated future redemptions of GE's interest in NBCUniversal, LLC."

UPS (NYSE: UPS  ) wrapped up $1.75 billion of new borrowing in five-, 10-, and 30 year paper. The money will be used to pay off some 4.5% notes maturing in January. Today's lower rates will deliver about $35 million per year in interest savings to the big shipping company.

MetLife (NYSE: MET  ) was in the market with five- and 10-year tranches of $500 million each. This transaction is a little complicated. The proceeds are used to pay obligations to holders of common equity units, who will then "purchase newly issued shares of MetLife common stock from MetLife, under stock purchase contracts constituting part of the common equity units."

Coal miner Alpha Natural Resources (NYSE: ANR  ) demonstrated the difference between investment-grade debt and high-yield debt, or junk. Its $500 million, five-and-a-half-year new issue carries a coupon rate of 9.75%. The money is being used to purchase up to $350 million of 3.25% convertible notes due in 2015 and for general corporate purposes.

Financial borrowers based outside the U.S. issued $7 billion of last week's total. Germany's KfW development bank tapped markets for $3 billion of 10-year debt. Credit Agricole (based in France), Swedbank (based in Sweden), and Canadian Imperial Bank of Commerce borrowed $1 billion each. Other foreign financials borrowing U.S. dollars last week were Banco Bilbao Vizcaya Argentaria (based in Spain), Global Bank (based in Panama), and Industrial Bank of Korea.

Companies don't appear to be having any trouble issuing bonds -- especially companies with decent credit ratings. Bond issues are rarely exciting, and they don't get the press of a big IPO or acquisition announcement, but it is important for investors to keep tabs on the borrowing habits of companies they own and what those companies are doing with the money.

Fool contributor Russ Krull owns shares of GE and has no position in any other company mentioned. You can follow his stock picks on CAPS. Motley Fool newsletter services have recommended buying shares of United Parcel Service. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (1) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 01, 2012, at 11:36 AM, arsailman1 wrote:

    I think they are taking advantage of the extremely low rates these days. Of course, they are not paying out more dividends or hiring workers, but borrowing is ok...

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2037947, ~/Articles/ArticleHandler.aspx, 9/21/2014 12:07:41 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement