New issues in U.S. corporate bond markets topped $24 billion last week, with one big borrower accounting for more than 20% of the total. Here are a few of the highlights.
Wal-Mart (WMT +0.64%) stocked the shelves with $5 billion spread over three-, five-, 10-, and 30-year notes. The SEC filing listed "general corporate purposes," including share buybacks, refinancing, acquisitions, and capital expenditures. The retail giant's credit rating let it price the bonds at the low coupon rates shown below. The spreads over comparable U.S. Treasuries range from 0.26 to 0.88%.
|
Principal Amount |
Coupon Rate |
Note Matures |
|---|---|---|
|
$1 billion |
0.6% |
April 2016 |
|
$1.25 billion |
1.13% |
April 2018 |
|
$1.75 billion |
2.55% |
April 2023 |
|
$1 billion |
4% |
April 2043 |
Source: Wal-Mart 424B2 SEC filing dated April 5, 2013.
Even though Wal-Mart wasn't specific, let's pull the refinance thread. A search at FINRA's bond center shows Wal-Mart with five bond issues maturing over the next 12 months. The total principal amount is $4.195 billion, with coupon rates ranging from 0.75% to 7.25%. The annual coupon payments on the $5 billion of newly issued paper are nearly $59 million per year lower than the coupon payments for the $4.195 billion of paper maturing over the coming year. Of course, Wal-Mart didn't say how much of the new money would go to redeeming maturing bonds.
Interested in an investment-grade bond paying 7.75%? Barclays (BCS +0.46%) just issued $1 billion of 10-year notes that fit the bill. Before calling brokers to place orders on a deal that seems too good to be true, a Foolish investor checks to see if there's a catch. And there is: The bonds are contingent convertible, meaning they convert to something else if some contingent trigger event happens. In this case, if Barclays' tier-one common equity ratio drops below 7%, the bonds convert to worthless paper. So much for bonds as low-risk investments.
DISH Network (DISH +0.00%) subsidiary DISH DBS broadcast new five- and seven-year issues for a total of $2.3 billion to be used for "general corporate purposes, which may include wireless and spectrum-related strategic transactions." The original plan was an issue of approximately $1 billion. DISH didn't say what happened between Tuesday and Wednesday to make "approximately" mean "more than twice as much."
Home Depot (HD +1.19%) hammered out $2 billion split between 10- and 30-year paper. At least some of the money is going to shareholders via share repurchases, while the rest will be used for the ever-popular "general corporate purposes."
I see two takeaways from last week's new issues. First, low rates continue to save money for companies refinancing debt, borrowing for capital expenditures, or even repurchasing shares. Second, bond research can't stop with yield and credit rating. If something's priced out of line with the rest of the market, there's usually a reason.
