Nov. 8 (Bloomberg) -- Icahn Enterprises LP, the holding company for financier Carl Icahn, plans to sell $500 million of bonds due in 2016 and 2018 in a reopening, as the company takes advantage of record-low borrowing costs.
The senior securities may be sold as soon as today, according to a person familiar with the transaction. Proceeds may be used for general corporate purposes, according to a statement distributed by PR Newswire that didn’t specify the timing of the sale.
The company, controlled by the billionaire’s New York-based hedge fund, is selling bonds as it mounts a hostile takeover of Lions Gate Entertainment Corp. and as borrowing costs for investment-grade companies fall to record lows. The average absolute yield on investment-grade debt touched 3.53 percent on Nov. 4, the lowest in daily readings that began in 1986, according to the Bank of America Merrill Lynch U.S. Corporate Master Index.
Icahn Enterprises’ 7.75 percent securities due in January 2016 traded at 103.94 cents on the dollar Nov. 4 to yield 6.66 percent, or 557.6 basis points more than similar-maturity Treasuries, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The company’s 8 percent notes due in January 2018 traded at 104.3 cents on the dollar on Nov. 5, yielding 6.99 percent, or a 589.6 basis-point spread, Trace data show. Icahn initially sold the bonds in January, according to data compiled by Bloomberg.
The company may offer the reopened notes due in 2016 for 103.25 to 103.5 cents on the dollar and may sell the bonds due in 2018 for 103.5 to 103.75 cents on the dollar, according to the person familiar with the transaction, who declined to be identified because terms aren’t set.
“With rates as low as they are now, and the other senior notes trading at roughly 540 basis points over ridiculously low Treasury rates, why not accumulate more cash for future buying power?” Barbara Cappaert, an analyst at Montpelier, Vermont-based KDP Investment Advisors, said in a note to clients. “Icahn has been very slow and prudent in its use of investing cash.
“The company has ample cash and liquidity and has not been aggressive in that use of cash in making operating acquisitions,” Cappaert said.
Icahn Enterprises is rated BBB- by Standard & Poor’s.
U.S. corporations are hoarding almost $1 trillion of cash, according to data compiled by Bloomberg. Borrowers have bolstered their finances by slashing spending and raising funds, selling $990.7 billion of U.S. corporate bonds this year, following a record $1.23 trillion in 2009, Bloomberg data show.
“A growing number of bond issues and newly-rated bank loan programs fund acquisitions,” Moody’s analysts led by John Lonski wrote in an Oct. 18 note to clients. “Expectations of significantly higher borrowing costs by late 2010 or early 2011 may prompt a surge of pre-fundings.”
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