Last Week in Bonds

Following a slow week, new corporate-bond issues bounced last week with more than $40 billion in borrowing. Companies based outside the U.S. continued to make up a big slice of the borrowing, swiping their credit cards for 40% of the total.

The biggest borrower was Oracle (Nasdaq: ORCL  ) with $5 billion spread over new five- and 10-year issues. The money will be used for "general corporate purposes, which may include stock repurchases, future acquisitions and repayment of indebtedness, including repayment of the 4.95% senior notes due April 2013 ($1.25 billion principal amount outstanding)." That leaves a lot of money for stock repurchases and acquisitions.

Now off to Europe for the next big borrower. Mining giant Xstrata (LSE: XTA.L  ) dug up $4.5 billion with three-, five-, 10-, and 30-year paper. The money is being used for general corporate purposes and to repay debt.

UnitedHealth Group (NYSE: UNH  ) prescribed $2.5 billion in equal doses of three-, five-, 10-, and 30-year debt to help pay for its acquisition of Brazilian health-care company Amil.

Hospital and medical center operator HCA Holdings (NYSE: HCA  ) got busy in the junk-bond market with two $1.25 billion, 10.5-year issues, one secured and one unsecured. The coupon rate is 4.75% on the secured notes and 5.875% on the unsecured. Initial plans were for a total of $2 billion across the two tranches. The money will be used for repayment of an existing loan and, in a page from the private-equity playbook, financing a dividend to stockholders. The loan balance being refinanced is a little more than a billion dollars, so there's plenty left for the dividend. Borrowing in the high-yield market to pay a dividend doesn't seem like the most prudent financial move, but HCA's investors and prospective investors can make that call for themselves.

CSX (NYSE: CSX  ) loaded a boxcar with $800 million of fresh cash by selling 32-year notes. CSX plans to use the money for "repayment of indebtedness ... repurchases of CSX's common stock, capital expenditures, working capital requirements, improvements in productivity and other cost reductions at CSX's major transportation units."

Vantage Drilling (NYSEMKT: VTG  ) subsidiary Offshore Group Investment drilled into the high-yield market for $1.15 billion of seven-year notes with a coupon rate of 7.5%, along with negotiating a new $500 million term loan facility. The money will be used to finance a tender offer for $1 billion of Offshore Group's existing 11.5% notes and for the final construction payment on the company's new Tungsten Explorer drill ship.

This one's interesting. Vantage's market capitalization is only $550 million, and the company has been reporting losses. If the tender offer for the higher-rate debt is successful, the refinance will save about $31 million per year in debt service. Vantage's losses over the past four quarters were about $32 million. If Vantage can find a little bit of operational improvement to go with the interest savings -- revenue from a new drill ship, for example -- the company could start turning a profit. It's speculative but worth following, and I'll be making an outperform CAPScall on Vantage.

Cheap money continues to flow, and companies from around the world and across credit ratings don't seem to be having much trouble borrowing at low rates. High-yield borrowers made up $9.7 billion of last week's total, and many of the offerings sold with coupon rates that aren't all that high.

Russ Krull has no positions in the stocks mentioned above. The Motley Fool owns shares of Oracle. Motley Fool newsletter services recommend UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (0)

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.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

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: 2068908, ~/Articles/ArticleHandler.aspx, 10/26/2016 11:36:38 PM

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...

Today's Market

updated 2 hours ago Sponsored by:
DOW 18,199.33 30.06 0.17%
S&P 500 2,139.43 -3.73 -0.17%
NASD 5,250.27 -33.13 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/26/2016 4:00 PM
CSX $30.38 Down -0.47 -1.52%
CSX CAPS Rating: ****
HCA $78.93 Down -2.03 -2.51%
HCA Holdings CAPS Rating: ***
ORCL $38.31 Down -0.05 -0.13%
Oracle CAPS Rating: ****
UNH $142.23 Down -1.55 -1.08%
UnitedHealth Group CAPS Rating: ****
VTG.DL $0.00 Down +0.00 +0.00%
Vantage Drilling C… CAPS Rating: ***