Dell’s bond deal comes on the heels of the busiest week for debt sales by blue-chip companies in the U.S and Europe since January.Paul Sakuma/The Associated Press
Dell Inc. sold $20-billion (U.S.) of bonds to back its takeover of EMC Corp. in what's the year's second-biggest corporate offering.
The computer maker received investor orders in excess of $80-billion, allowing the company to increase the deal from $16-billion and reduce the interest rates it offered, according to data compiled by Bloomberg and a person familiar with the matter. The offering is the largest corporate sale since Anheuser-Busch InBev NV sold $46-billion of notes in January to finance its takeover of SABMiller Plc.
"People are very well prepared for the big deals that we know are coming," said Timothy Doubek, a money manager at Columbia Threadneedle, which has about $176-billion in fixed-income assets under management. "We're still in the normal process of starting out with price talk being extremely wide, and everybody knows that it isn't going to come there and they build a large book and things come with modest concessions."
The demand allowed Dell to lower the yields on the debt. The longest part of the offering, $2-billion of 30-year bonds, will pay 5.75 percentage points more than similar-maturity Treasuries, the person said. While that's down from an original offer of 6.25 percentage points, it's 3.55 percentage points more than the average spread on all U.S. corporate bonds of similar ratings and maturities, according to Bank of America Merrill Lynch data.
A proposed $4.5-billion 10-year note will yield 4.25 percentage points above government debt, the person said. That's a premium of more than 1.5 percentage points over comparable notes. The debt was first marketed at 4.75 percentage points.
Busy Week
Dell's bond deal comes on the heels of the busiest week for debt sales by blue-chip companies in the U.S and Europe since January. Top-rated issuers sold about $74-billion of notes in the five-day period ending May 13, according to data compiled by Bloomberg.
Creditsights Inc. analysts led by Erin Lyons rated the offering the equivalent of a buy in a note on Monday, saying the bonds offer "compelling value" compared to the debt of peers including HP Inc. and Hewlett Packard Enterprise Co.
Moody's Investors Service assigned a Baa3 rating to the bonds last week. S&P Global Ratings graded the debt an equivalent triple-B-minus. Dell also plans to sell $3.25-billion of unsecured notes in the high-yield market, according to S&P.
Bank of America Corp., Barclays PLC, Citigroup Inc., Credit Suisse Group AG, Goldman Sachs Group Inc. and JPMorgan Chase & Co. managed the sale.
Investors have been on the lookout for a host of debt offerings from Dell since the company said in October that banks had committed $49.5-billion of financing for the takeover. In April, the computer maker was close to placing a senior portion of the debt financing – $11-billion of term loans that were up-sized by $1-billion – through a syndicate of 24 banks, a person with knowledge of the matter said at the time.