Rabobank Nederland NV, the world’s largest agricultural lender, plans to sell 100-year bonds in the second dollar-denominated sale of such securities this year as the cost of long-dated borrowing hovers near a record low.
The $250 million of debt, which is set to be sold as soon as today, could be increased “slightly” because of strong interest, said Michael Gower, head of long-term funding at Rabobank.
Rabobank is marketing the debt less than a month after Norfolk Southern Corp., the fourth-largest U.S. railroad, issued $250 million of 100-year bonds in the first sale of debt with that maturity since 2005, according to data compiled by Bloomberg. Rabobank also sold 300 million pounds ($466 million) of bonds due 2060 on July 27, Bloomberg data show. The lender is seeking to tap long-term debt demand from investors, especially pension funds and insurance companies, Gower said.
“Given where yields are, and on the back of the NSC deal that raised a few eyebrows, we thought this was an opportune time to look at something a bit longer,” Gower, who’s based in Utrecht, Netherlands, said in a telephone interview. “It’s a real confirmation of the strength of the credit, and obviously, it’s borrowing 100-year money at historically low levels.”
Yields on investment-grade corporate bonds maturing in 15 years or more fell to 5.64 percent yesterday, after dropping as low as 5.37 percent on Aug. 26, according to Bank of America Merrill Lynch, the lowest since the daily index tracking such bonds began in 1986. The yield on investment-grade debt due in 5 to 10 years was 4.25 percent yesterday, the data show.
“It’s a significant pick-up over your standard five- or 10-year maturity,” Gower said. Investors “want to put money to work in long maturities with credits and issuers they’re very comfortable with.”
Rabobank is rated AAA by Standard & Poor’s, the highest investment-grade ranking, and an equivalent Aaa by Moody’s Investors Service.
The offering may be the first 100-year bond sale in dollars by a bank, Gower said, which is “very much a testament to the strength of the credit story.”
The debt offering by Norfolk Southern, based in Norfolk, Virginia, was a reopening of a March 2005 transaction, Bloomberg data show. Its $250 million of 6 percent notes priced to yield 229 basis points more than similar-maturity Treasuries, or 5.95 percent, Bloomberg data show.