April 3 (Bloomberg) -- Dell Inc., the world’s second- largest personal-computer maker, and refrigeration-equipment producer Ingersoll-Rand Co. borrowed at higher rates this week than in offerings last year, amid investor concern that the recession will squeeze their cash reserves.

Dell, based in Round Rock, Texas, sold $500 million of debt due 2014 at almost a percentage point more in interest costs than in its last offering in April 2008. Bonds sold by Ingersoll-Rand rallied after the company paid nearly eight percentage points more than benchmarks on its five-year notes.

PC sales may decline for the first time since 2001 this year as unemployment rises and companies curb spending, damping Dell’s revenue. Ingersoll-Rand cut its dividend as part of a $1 billion financing plan announced this week to “enhance its credit profile.” Bond investors are penalizing borrowers seeking to shore up cash and reduce debt to weather the economic turbulence, said Guy Lebas, chief economist at Janney Montgomery Scott LLC.

“The market is continuing to separate out those credits that have true liquidity stresses and should be punished as a result, versus those that are liquidity pressures in perception rather than reality,” Lebas, who is based in Philadelphia, said yesterday in a telephone interview.

Yields on investment-grade bonds relative to benchmark rates dropped 14 basis points since March 27 to 582 basis points as of yesterday, according to Merrill Lynch & Co.’s U.S. Corporate Master index. A basis point is 0.01 percentage point. Overall yields on investment-grade debt fell 16 basis points to 7.96 percent.

Unemployment Rises

The U.S. unemployment rate climbed in March to the highest level since 1983 and the economy lost more than 650,000 jobs for a fourth consecutive month, a sign renewed reductions in spending might slow a recovery, the Labor Department said today.

U.S. stocks rallied yesterday, extending a global advance, as world leaders agreed on measures to fight the recession and accounting regulators approved a rule change that may boost bank profits.

Corporate bond sales declined 62 percent from last week to $14.7 billion, according to data compiled by Bloomberg. Investment-grade borrowers issued $5.8 billion of non-government guaranteed debt this week, compared with $13.4 billion last week.

Dell’s 5.625 percent notes priced to yield 400 basis points more than similar-maturity Treasuries, compared with a 4.7 percent coupon on the five-year notes sold last April that paid a 212 basis-point spread, Bloomberg data show.

‘Attractive’ Yield

Bonds of investment-grade technology and electronics companies yielded 378 basis points more than Treasuries on April 1, the day of Dell’s bond sale, Merrill Lynch index data show. The average spread was 229 basis points on April 14, 2008, when the company last sold debt, according to the index.

The coupon on this week’s debt is appealing when compared with historical yields on A tier debt for companies such as Dell, company spokesman Jess Blackburn wrote in an e-mail.

“In today’s market, we view the all-in achieved yield as attractive,” Blackburn wrote. The 4.7 percent coupon “was a good level a year ago and one of the lower points in recent history, but markets have fundamentally changed.”

Hewlett-Packard Co., the world’s largest personal-computer maker and Dell’s main competitor, paid a 4.75 percent coupon on 5-year notes sold Feb. 23 that priced to yield 295 basis points more than Treasuries, Bloomberg data show.

“We looked at Dell recently, and they have a changing business model and are a marginally deteriorating credit,” said Greg Haendel, who helps oversee $6.2 billion at Transamerica Investment Management in Los Angeles. “Regardless of however high quality a company it may be, most new issue spreads today are still going to be wider than where they were last year at this time,” said Haendel, who didn’t purchase the notes.

Lost PC Lead

Dell founder Michael Dell, who retook the chief executive officer job two years ago, has been working to revive sales and earnings after his company lost the PC market lead to Palo Alto, California-based Hewlett-Packard in 2006. PCs are Dell’s biggest money maker, accounting for about 60 percent of revenue. Market research firm IDC predicts worldwide PC shipments will drop 4.5 percent to 282 million machines in 2009, marking the first industry-wide drop in eight years.

Dell’s notes are rated A2 by Moody’s Investors Service, the sixth level of investment quality, and one step lower at A- by Standard & Poor’s. The company’s A2 rating is “well positioned despite challenging market conditions that we expect will pressure revenue during the coming year,” Moody’s wrote in a report released yesterday.

Ingersoll-Rand

Ingersoll-Rand sold $655 million of five-year, 9.5 percent debt that priced to yield 783.8 basis points more than similar- maturity Treasuries, Bloomberg data show. In August 2008, the company sold five-year notes with a 6 percent coupon and a 287.5 basis point-spread.

Proceeds from the sale will be used to repay a bridge loan maturing in June 2009 and to “provide additional liquidity,” the company said in a March 30 statement.

Ingersoll-Rand projected first-quarter sales of about $2.9 billion, a decrease of as much as 27 percent. It announced this week that it had reduced its quarterly dividend to 7 cents a share from 18 cents to save $140 million a year.

CEO Herbert Henkel has accelerated efforts to restructure the company, and plans to relocate it to Ireland from Hamilton, Bermuda.

The new notes rose to 103 cents on the dollar as of yesterday from 99.99 cents when they were issued March 31, according to Trace, the bond price-reporting system of the Financial Industry Regulatory Authority. Moody’s rates the securities Baa1, its third-lowest investment grade, and S&P ranks them an equivalent BBB+.

Paul Dickard, a spokesman for Ingersoll-Rand, didn’t return a telephone call and e-mail seeking comment.

High Yield

Yields over benchmark rates on speculative-grade debt rose 3 basis points this week to 16.78 percentage points as of yesterday, according to Merrill’s U.S. High Yield Master II index. They narrowed 99 basis points last week.

AES Corp., an Arlington, Virginia-based power producer, and Bway Corp., the maker of paint containers and aerosol cans, led $964 million of high-yield debt sales this week, the most in a month, according to data compiled by Bloomberg.

High-yield debt is rated below Baa3 by Moody’s and lower than BBB- by S&P.

Whirlpool Corp., the world’s biggest appliance maker, and Dow Chemical Co., the largest U.S. chemical maker, are among borrowers with planned offerings.

To contact the reporter on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net

Last Updated: April 3, 2009 09:15 EDT