Last week was a busy one in the U.S. bond market with 41 borrowers tapping bond investors for about $34 billion in new issues, according to Reuters' bond calendar. Borrowers came from health care, international financials, industrials, and even a certain company from Omaha. Here's a rundown of a few borrowers and what they plan on doing with all that money.
WellPoint (NYSE: WLP) led the charge to charge with $3.25 billion in three-, five-, 10-, and 30-year paper. Nearly all of the new money will be used for its Amerigroup acquisition. Amerigroup closed Friday less than a dollar below the bid price of $92 per share, which doesn't leave much on the table for arbitrage traders.
General Electric's (NYSE: GE) GE Capital showed it could play big with $2.8 billion in three- and 10-year issues. The new borrowing was done under an existing registration, and the supplemental filings didn't add anything beyond: "We will add the net proceeds from the sale of the securities to which this prospectus and the prospectus supplement relate to our general funds, which we use for financing our operations." A few more details would be nice for a couple of billion-plus.
The Oracle of Omaha was in the house, with Berkshire Hathaway (NYSE: BRK-B) rolling out $750 million in new five-, 10-, and 30-year debt. Berkshire will be using the money to pay off "existing $750 million aggregate principal amount of 5.125% Senior Notes." The refinancing should save Buffett and company more than $15 million per year in interest expenses.
Rock-Tenn (NYSE: RKT) joined in the refinancing game by borrowing $700 million in a private deal for 7.5- and 10-year paper. The new money will be used to repay part of its revolving credit facility and some other loans.
Flowserve (NYSE: FLS) tapped the credit markets for $500 million in 10-year paper and will be multitasking with the money. Plans include paying off a bridge loan, paying down its revolving credit facility, and a share repurchase. A share repurchase with borrowed money shows management confidence in the company. I'm not ready to make a CAPScall on Flowserve based solely on a planned share repurchase, but am adding it to My Watchlist.
There were also a number of borrowers based outside the U.S. -- mostly financials -- pulling out their passports for a trip to the U.S. markets. Australia & New Zealand Bank led the way with $3 billion of new borrowing. Others joining the party included Banco de Credito (based in Chile), Bancolombia, Banco Santander Brasil, Bank of Montreal, Korea Development Bank, OCBC Group (based in Singapore), and Rentenbank (from Germany).
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 on what those companies are doing with the money.
- Add WellPoint to My Watchlist.
- Add Rock-Tenn to My Watchlist.
- Add General Electric to My Watchlist.
- Add Flowserve to My Watchlist.
- Add Berkshire Hathaway to My Watchlist.
