DirecTV Sells $4 Billion of Bonds as Company Plans Stock-Buyback Program
DirecTV (DTV) issued $4 billion of debt as the largest U.S. satellite-television provider takes advantage of the lowest relative yields on investment-grade bonds in more than three years to reward shareholders.
DirecTV sold $1.5 billion each of 5- and 10-year notes and $1 billion of 30-year debt in the second-biggest bond sale by a nonfinancial company this year, according to data compiled by Bloomberg. Proceeds may be used for share repurchases, the company said today in a regulatory filing.
The satellite-television provider said on Feb. 23 its board approved a new $6 billion stock-buyback program after the El Segundo, California-based company purchased about 136 million shares for $5.11 billion in 2010. Chief Executive Officer Michael White is taking advantage of the lowest relative yields on investment-grade corporate debt since October 2007 to fund the buybacks.
“What became clear to me when I got here was that we’re in a unique environment with all-time record low interest rates,” White said in a Dec. 2 conference call. “We are able to kind of frankly change our capital structure in a very advantaged way, almost like we’re private-equity, except we’re doing it with a public company and it’s been a huge success for our shareholders.”
DirecTV shares gained 46 percent in 2009 and 20 percent in 2010, finishing last year at $39.93. They’ve added 14.8 percent this year to $45.84 today.
Biggest Sale
The biggest sale by a nonfinancial company this year was a $6 billion offering from Petroleo Brasileiro SA on Jan. 20, Bloomberg data show. It matched a $6 billion sale by General Electric Capital Corp., the finance arm of General Electric Co., on Jan. 4, the data show.
American Airlines Inc. and Hertz Global Holdings Inc. marketed or sold at least $5.6 billion of debt today, according to data compiled by Bloomberg.
AMR Corp.’s American Airlines said it planned to sell $1 billion of five-year senior notes secured by routes, takeoff and landing slots and rights to use space in airport terminals, the Fort Worth, Texas-based company said today in a statement.
Hertz Corp. sold $500 million of 6.75 percent senior notes due 2019 in an addition to a February sale, Bloomberg data show.
DirecTV Spread
Investors demanded less extra yield over Treasuries to buy today’s DirecTV bonds than in the company’s $3 billion offering in August, Bloomberg data show.
The five-year notes yield 135 basis points more than similar-maturity Treasuries, the 10-year debt pay a spread of 155 basis points and the 30-year bonds yield 175 basis points more than benchmarks, the data show.
In August, the company’s offering included $1 billion of notes due February 2021 that priced at a 185 basis-point spread, and $1.25 billion of 30-year bonds that priced to yield 210 basis points more than benchmarks, Bloomberg data show. A basis point is 0.01 percentage point.
The company issued the bonds through DirecTV Holdings LLC and DirecTV Financing Co., according to the filing.
The Federal Reserve has held its key interest rate at zero to 0.25 percent since December 2008 to spur economic growth. The extra yield investors demand to own investment-grade corporate bonds instead of Treasuries fell to 148 basis points on Feb. 17, the least since October 2007, according to Bank of America Merrill Lynch index data. The spread widened to 149 basis points on March 4.
To contact the reporter on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net
To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net
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