General Mills Inc. (GIS), the maker of Cheerios cereal, sold $1 billion of bonds in its first benchmark offering in about 14 months, including its first 30-year debt since 2010.
The company’s $250 million of 0.875 percent, three-year fixed-rate notes yield 45 basis points more than similar- maturity Treasuries, $250 million of three-year floating-rate bonds yield 30 basis points more than the London interbank offered rate, and $500 million of 4.15 percent, 30-year securities have a relative yield of 105 basis points, according to data compiled by Bloomberg. Proceeds will be used to repay debt.
General Mills is one of the food and beverage companies “that all the guys want to own,” Jody Lurie, a corporate credit analyst at Janney Montgomery Scott LLC in Philadelphia, said in a telephone interview. “There are so few issuers out there that any sort of issuance gets priced very, very tight.”
It last sold 30-year securities in May 2010, issuing $500 million of 5.4 percent debt at a spread of 130 basis points, Bloomberg data show. The bonds traded at 122.8 cents on the dollar to yield 4.02 percent, at a spread of 100.1 basis points, on Jan. 23, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
General Mills previously sold benchmark debt in November 2011, issuing $1 billion of 3.15 percent, 10-year debentures. Benchmark sales are typically at least $500 million.
General Mills’s “balance sheet, as it stands today, is strong and healthy, but also leaves some risks on the table for additional debt-financed acquisitions,” Edward Mui, an analyst at CreditSights Inc., wrote in a research note today, adding that the company may look to acquisitions abroad.
Credit Suisse Group AG, Deutsche Bank AG and JPMorgan Chase & Co. managed today’s offering for the Minneapolis-based company, Bloomberg data show. The bonds are rated Baa1 by Moody’s Investors Service and BBB+ by Standard & Poor’s.
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