EMC Borrows Big for a Buyback and a Dividend

Last week's new U.S. corporate bond issues rolled in at a little more than $17 billion -- a pickup in activity from the previous week but well below the average for the past few months. Here are a few of the highlights.

EMC (NYSE: EMC  ) led the borrowing with a three-part, $5.5 billion issue. The money is going back to shareholders through a $5 billion expansion of EMC's share repurchase program and a new dividend. As of Friday's close, the dividend yield will be 1.6%, and that $5 billion buyback authorization could take down nearly 10% of the company's outstanding shares.

Baxter (NYSE: BAX  ) borrowed $3.5 billion spread across five new notes. About $3 billion will go toward funding Baxter's acquisition of Gambro AB, a dialysis product and technology firm. The remaining money will go to repay commercial paper.

Allstate (NYSE: ALL  ) put $1.25 billion in its good hands with $1 billion split between 10- and 30-year notes and another $250 million of perpetual preferred shares. The money is going to help fund a $2.2 billion tender offer for nine series of notes, all with higher rates than the new notes and most with higher rates than the new preferred shares.

Aflac (NYSE: AFL  ) sold $700 million in 10-year notes. The money will go toward redeeming two yen-denominated notes with a principal value of about $340 million due in 2014 and $300 million in U.S. dollar-denominated notes due in 2015. Any money left over goes toward "general corporate purposes," including capital contributions to subsidiaries, if needed. With Japan's Central Bank aggressively easing, it's curious that Aflac chose to borrow dollars to pay back yen-denominated notes.

Beam (NYSE: BEAM  ) poured a cocktail of five- and 10-year notes totaling $500 million. The money is funding a tender offer for five series of notes, all with significantly higher coupon rates than the new paper. The deal should save the distiller about $17 million per year in debt service expense.

A buyback, a dividend, an acquisition, and three refinancing deals made up well more than half the bond deals last week. Low rates continue to help companies make acquisitions, save money by refinancing debt, and return money to shareholders, but they're not generating a lot of activity that's likely to create jobs.

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