Bloomberg the Company & Products

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

IBM Plans Debt 4 Months After Record-Low-Coupon Issue

Dec. 6 (Bloomberg) -- International Business Machines Corp., the world’s biggest computer-services provider, plans to sell $1 billion of debt due January 2016 as soon as today, according to a person familiar with the transaction.

IBM is marketing the notes four months after selling $1.5 billion of debt due 2013 at the lowest interest rate on record at the time, according to data compiled by Bloomberg, and two weeks after Moody’s Investors Service upgraded the senior unsecured rating of IBM’s debt one level to Aa3 from A1, citing a growing emphasis on higher-margin software and services.

The company plans to spend about $20 billion on acquisitions by 2015 as it aims to almost double operating earnings per share. Chief Executive Officer Sam Palmisano is investing in analytics software and services that help predict trends, as well as cloud computing, which helps customers save money by letting them store and access data via the Internet, rather than from their own servers.

The Moody’s upgrade is “a good reason to expect relatively tight spreads on the new offering,” said Guy LeBas, chief fixed-income strategist and economist at Janney Montgomery Scott LLC in Philadelphia. “In terms of spread, we could actually see it being priced a little tighter than in August.”

Issue Details

The offering may yield 55 basis points more than similar-maturity Treasuries, said the person familiar with the offering, who declined to be identified because terms aren’t set. That implies a yield of about 2.10 percent, based on today’s Treasury bond prices. A basis point is 0.01 percentage point.

Absolute yields on investment-grade debt have declined seven basis points to 3.989 percent since Aug. 2, according to Bank of America Merrill Lynch’s U.S. Corporate Master Index, after earlier touching 3.53 percent on Nov. 4, the lowest yield since the index began in October 1986.

“Total costs could be similar to what we would’ve seen in August with a five-year,” said LeBas in a telephone interview.

IBM’s 1 percent debt maturing August 2013 traded at 99.778 cents on Dec. 3 to yield 1.085 percent, or 30.4 basis points more than similar-maturity Treasuries, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The notes were sold at a spread of 30 basis points. The company, which has completed 16 acquisitions this year, ended the third quarter with more than $11 billion in cash and short-term investments, according to data compiled by Bloomberg.

To contact the reporters on this story: Boris Korby in New York at bkorby1@bloomberg.net; Katie Hoffmann in New York at khoffmann4@bloomberg.net

To contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net Peter Elstrom at pelstrom@bloomberg.net

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.