Mondelez International Inc., the maker of Oreo cookies that was spun off from Kraft Foods Inc. in 2012, issued $3 billion of debt to help fund a tender offer. A gauge of company credit risk held at about the highest level in three weeks.
The snack-food maker sold securities as it uses the tender to chip away at its longest-maturity bonds, coming due after 2030, the company said today in a statement. The debt requested for tender pays interest at 6.5 percent or more compared with a weighted average coupon of 5.28 percent on its fixed-rate securities, according to data compiled by Bloomberg.
Borrowers are returning to the market after a record year for U.S. bond sales as spreads on the debt narrow to their lowest levels in more than six years. The Federal Reserve announced a plan last month to begin tapering unprecedented stimulus measures amid signs that the economy is improving.
“The taper ‘shoe’ that dropped in December has actually been helpful to credit-market participants,” Edward Marrinan, a macro credit strategist at RBS Securities, said in a telephone interview from Stamford, Connecticut. “Most took the taper announcement in stride, a reaction that smooths the way for issuers to continue bringing deals.”
The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark used to hedge against losses or to speculate on creditworthiness, increased 0.1 basis point to 65.1 basis points as of 5:10 p.m. in New York, according to prices compiled by Bloomberg. That’s poised for the highest closing level since 66 basis points on Dec. 19. The measure typically rises as investor confidence deteriorates and falls as it improves.
The trailing 12-month global speculative-grade corporate default rate ended last year at 2.6 percent, down from 2.9 percent at the end of 2012, according to a report today from Moody’s Investors Service. The credit grader forecasts the rate will drop to 2.3 percent by the end of this year.
Mondelez raised $850 million of 2.25 percent, five-year notes to yield 60 basis points more than similar-maturity Treasuries and $400 million of five-year, floating-rate securities to yield 52 basis points more than the three-month London interbank offered rate, Bloomberg data show. It also issued $1.75 billion of 4 percent, 10-year notes at a 105 basis-point spread. The sale may be rated Baa1 by Moody’s.
Proceeds will be used to help fund a tender offer and for general corporate purposes, the Deerfield, Illinois-based company said today in a regulatory filing.
Mondelez is tendering for as much as a combined $1 billion of $4.6 billion of debentures, including its $2.2 billion of 6.5 percent bonds due in 2040, according to the company statement.
Hewlett-Packard Co., the world’s biggest maker of personal computers, issued $2 billion of five-year notes, comprising $1.25 billion of 2.75 percent bonds that pay a spread of 102 basis points more than benchmarks and $750 million of floating- rate notes at 94 basis points more than Libor, Bloomberg data show.
The Palo Alto, California-based company has $5.5 billion of debt coming due in 2014, its largest amount of maturities for a single year, the data show.
The sales are adding to $25.9 billion of deals this week from Sumitomo Mitsui Financial Group Inc. to Icahn Enterprises LP., Bloomberg data show.
The Fed took the first step toward unwinding the unprecedented stimulus that Chairman Ben. S. Bernanke put in place to help the economy recover from the worst financial crisis since the Great Depression on Dec. 18, saying it would reduce the pace of its monthly asset purchases to $75 billion from $85 billion.
The extra yield investors demand to own corporate bonds from the most creditworthy to the riskiest borrowers in the U.S. rather than government debentures fell to 182 basis points yesterday, the lowest since July 2007, according to the Bank of America Merrill Lynch U.S. Corporate & High Yield index.
The risk premium on the Markit CDX North American High Yield Index, tied to the debt of 100 speculative-grade companies, was little changed at 315 basis points, Bloomberg prices show. High-yield, high-risk bonds are rated below Baa3 by Moody’s and less than BBB- at Standard & Poor’s.
The contracts pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.