The Wall Street Journal reported that nonfinancial, corporate bond issues hit a record $29.7 billion last week. Let's see who's borrowing all that money and what they're doing with it.
|
Company |
Amount Issued |
Coupon Rate |
Maturity |
|---|---|---|---|
|
Aetna (NYSE: AET) |
$500 million |
4.13% |
2021 |
|
Google (Nasdaq: GOOG) |
$3.0 billion |
1.25%-3.625% |
2014-2021 |
|
Johnson & Johnson (NYSE: JNJ) |
$4.4 billion |
Floating – 4.85% |
2013–2041 |
|
Kellogg's (NYSE: K) |
$400 million |
3.25% |
2018 |
|
McDonald's (NYSE: MCD) |
$400 million |
3.63% |
2021 |
|
Texas Instruments (NYSE: TXN) |
$3.5 billion |
Floating – 2.375% |
2013-2016 |
Sources: Reuters and SEC filings.
Six companies accounted for about 40% of last week's corporate bond issue and the most common plan for the money among this group is paying off commercial paper.
Google, Johnson & Johnson, and Kellogg's plan on using the money to repay commercial paper. In each case, the company is paying off inexpensive commercial paper with higher-yielding debt. My Foolish colleague Rick Aristotle Munarriz raised the obvious question on Google's new debt -- why does a company with billions in cash need to hit the debt markets?
McDonald's doesn't say how it will use the money. Aetna will be paying off a maturing bond issue, and Texas Instruments plans to put the money toward its acquisition of National Semiconductor (NYSE: NSM). Separate from the bond issue, Aetna announced an increase in its share buyback program.
As a stock investor, it's easy to ignore the bond market, but a look at debt and how a company uses that money should be a part of Foolish investment research.
In a week with record corporate debt, at least three big firms are borrowing money to pay off less expensive commercial paper, and Aetna has arguably decided share buybacks are a better use of money than paying down debt. That looks like companies preparing for -- or at least protecting against -- climbing interest rates. Smart investors will join those CFOs and take a look at what higher interest rates would mean for their portfolios.
Are interest rates headed up soon or will cheap money be here for some time? Add your opinion with a comment below.
You can follow any of the stocks mentioned using our free watchlist service, My Watchlist.
- Add Aetna to My Watchlist
- Add Google to My Watchlist.
- Add Johnson & Johnson to My Watchlist.
- Add Kellogg's to My Watchlist
- Add McDonald's to My Watchlist.
- Add Texas Instruments to My Watchlist.
- Add National Semiconductor to My Watchlist.
