Blackstone to Shell Help Lead $12 Billion of Bond Offerings

Corporate issuers from Blackstone Group LP (BX) to Royal Dutch Shell Plc (RDSA) are leading offerings of about $12 billion in the U.S. by selling their first bonds in two years with yields at about record lows.

Shell, Europe’s largest oil producer, raised $2.5 billion in a three-part offering through its international finance unit, and New York-based Blackstone borrowed for the first time since September 2010 with a $650 million sale that included its first 30-year obligations, according to data compiled by Bloomberg. Today’s dollar-denominated offerings exceed the daily average of $6.7 billion this month through last week, which was 8 percent higher than in July.

Companies including Philip Morris International Inc. and American Express Co. are exploiting investment-grade borrowing costs that dropped to an unprecedented 3.03 percent this month, according to Bank of America Merrill Lynch index data. Investors are giving companies the opportunity to issue low-cost debt by plowing money into the securities that yield more than U.S. government bonds, according to James Lee of Calvert Investments.

“The capital markets window is wide open,” Lee, an analyst at Bethesda, Maryland-based Calvert, which manages about $12.5 billion, said in a telephone interview. “Pension funds and insurance companies are looking for yield. There’s just very, very strong demand out there, particularly for high-grade names.”

Yields Decline

Average yields on investment-grade debt have declined 79 basis points this year to 3.11 percent, Bank of America Merrill Lynch index data show. The measure was 3.64 percent a year ago.

Blackstone, the world’s largest private-equity firm, sold $400 million of 4.75 percent debt due February 2023 that yielded 325 basis points more than similar-maturity Treasuries and $250 million of 6.25 percent, 30-year bonds with a 375 basis-point spread, Bloomberg data show. Proceeds will be used for general corporate purposes, Blackstone said today in a release.

The firm’s $400 million of 5.875 percent senior unsecured notes maturing March 2021 traded at a high of 109.9 cents on the dollar on July 23 to yield 4.48 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Shell Issue

Shell sold $1 billion of 1.125 percent, five-year bonds with a 50 basis-point spread, an equal portion of 2.375 percent debt due in 2022 that yielded 70 basis points more than benchmarks and $500 million of 3.625 percent, 30-year obligations with a spread of 82 basis points. Shell, which last issued dollar obligations due in three decades in March 2010, will use proceeds for general corporate purposes, The Hague- based company said today in a regulatory filing.

Shell’s longest outstanding maturity, its $1 billion of 5.5 percent bonds due March 2040, traded at 130.4 cents on the dollar to yield 3.73 percent at 3 p.m. in New York, Trace data show.

Other borrowers include Philip Morris, the world’s largest publicly traded tobacco company, which raised $2.25 billion divided evenly among five-, 10- and 30-year bonds, and New York- based American Express, which offered an additional $750 million of its 1.75 percent bonds due in 2015 first sold June 7.

DaVita Inc. (DVA), the dialysis services provider whose biggest shareholder is billionaire Warren Buffett’s Berkshire Hathaway Inc., sold $1.25 billion of 5.75 percent, 10-year notes with a 404 basis-point spread to help fund its $4.4 billion acquisition of HealthCare Partners. Peter Grauer, the chairman of Bloomberg LP, the parent company of Bloomberg News, has served on DaVita’s board of directors since 1994.

Cenovus Energy Inc. (CVE), the oil-sands producer spun off by Encana Corp. (ECA) in 2009, issued $1.25 billion in a two-part offering of 10- and 30-year securities.

To contact the reporters on this story: Charles Mead in New York at cmead11@bloomberg.net; Matt Robinson in New York at Mrobinson55@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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