Oct. 9 (Bloomberg) -- International Business Machines Corp. raised $4 billion in the biggest U.S. bond sale in five weeks after the company said its profit this year will hold up against the worst financial crisis since the Great Depression.

IBM, the world's largest computer-services company, took advantage of its announcement yesterday that third-quarter earnings likely beat analyst estimates and full-year profit will meet management's forecast.

``You gotta strike while the fire's hot,'' said Scott MacDonald, director of research at Aladdin Capital Management in Stamford, Connecticut, whose firm manages about $16.5 billion of assets. ``Who knows when the credit market's going to be open again. Timing is everything.''

The offering, IBM's biggest, may open the market for other borrowers, said Vincent Murray, managing director and head of U.S. fixed-income syndicate at Mizuho Securities USA in New York.

``I don't expect a floodgate, but there will be more deals,'' said Murray, whose firm was a co-manager on the deal. IBM's ``a premier name and certainly with none of the exposure that the market is worried about.''

The yields over benchmark rates that IBM paid were the highest on record for the Armonk, New York-based company as borrowing costs for most companies soar amid the financial crisis. The extra yield investors demand to own investment-grade bonds over government debt rose today to a record 535 basis points, according to Merrill Lynch & Co.'s U.S. Corporate Master index. That's more than six times the gap in February 2007.

`Markets Were Open'

IBM's three-part sale included $1.4 billion of 6.5 percent, five-year notes, and $1.6 billion of 7.625 percent, 10-year notes that priced to yield 387.5 basis points above similar-maturity U.S. Treasuries, according to data compiled by Bloomberg. IBM also issued $1 billion of 8 percent 30-year bonds with a spread of 400 basis points. A basis point is 0.01 percentage point.

Investment-grade bond yields on average jumped to 8.49 percent today, the highest since January 1995, Merrill's index data show. The yield was 5.9 percent five months ago.

IBM's preliminary earnings report sent its shares up as much as 5.3 percent today in New York Stock Exchange composite trading before they fell with the rest of the market, closing down $1.55 at $89. The company is counting on emerging markets and long-term contracts to make up for a slump in the financial-services market triggered by bank failures and tightening credit.

``The markets were open to us at this time, so we decided to enter,'' said Doug Shelton, an IBM spokesman. ``As we looked at the pending maturities it just made sense to us.''

IBM has at least $25 billion in bonds outstanding, including $9.8 billion maturing next year, according to data compiled by Bloomberg.

`Positive Reputation'

Companies sold $15 billion in bonds in the past five weeks through yesterday, the worst slump in at least a decade and 89 percent less than in the same period a year ago, Bloomberg data show.

IBM's ability to sell debt during such a severe financial crisis with markets ``pretty much frozen'' reveals its ``positive reputation,'' MacDonald said. Still, IBM had to price the deal ``very cheap to get it done,'' he said.

IBM's new debt is rated A1, the fifth-highest investment grade, by Moody's Investors Service, and an equivalent A+ by Standard & Poor's. Barclays Plc, Bank of America Corp., Credit Suisse Group AG and Deutsche Bank AG were the lead managers.

IBM last issued bonds in July, when it sold $1 billion of 3.375 percent, three-year floating-rate notes. Its biggest sale before today was in January, when IBM sold $3.5 billion of debt.

Earnings

The company's preliminary third-quarter earnings report yesterday, which precedes IBM's full results on Oct. 16, helped soothe concern that the global financial crisis would hurt the company.

Profit last quarter increased to $2.05 a share, excluding some items, topping the $2.01 average estimate of analysts in a Bloomberg survey. Profit for the year will be at least $8.75 a share, IBM said yesterday in a statement, reaffirming a previous forecast.

``Maybe they felt that this was the best time for them to come to market with a strong wind at their back by their own performance,'' MacDonald said. ``So from IBM's standpoint, you're a highly rated company. You have the ability to get into a tough market.''

To contact the reporters on this story: John Detrixhe in New York jdetrixhe@bloomberg.net; Bryan Keogh in New York at bkeogh4@bloomberg.net

Last Updated: October 9, 2008 18:31 EDT