IBM Plans Its Biggest Bond Sale With $4 Billion in Offerings By John Detrixhe
Oct. 9 (Bloomberg) -- International Business Machines Corp., the world's largest computer-services company, plans to raise $4 billion in its biggest sale of dollar-denominated bonds. The three-part debt sale would be the largest in the U.S. since Sept. 2, when credit markets seized up amid the collapse of some of the nation's biggest financial companies. IBM is taking advantage of positive investor reaction to its announcement yesterday that profit is holding up amid a financial crisis that has led to record swings in stocks and bonds. The Armonk, New York-based company is counting on emerging markets and long-term contracts to make up for a slump in the financial services triggered by bank failures and tightening credit. The debt sale includes $1.4 billion of five-year notes and $1.6 billion of 10-year notes that may price to yield 387.5 basis points above similar maturity U.S. Treasuries, and $1 billion of 30-year bonds with a spread of 400 basis points, according to a person familiar with the offering, who declined to be identified because terms aren't set. A basis point is 0.01 percentage point. The spreads would be the widest on record for IBM as borrowing costs for most companies soar amid the financial crisis. The extra yield investors demand to own investment-grade bonds over government debt rose yesterday to a record 526 basis points, according to Merrill Lynch & Co.'s U.S. Corporate Master index. That's more than six times the gap in February 2007. IBM's debt will be rated A1, the fifth-highest grade of investment quality, by Moody's Investors Service, and an equivalent A+ by Standard & Poor's, the person said. The sale will be managed by Barclays Plc, Bank of America Corp., Credit Suisse Group AG and Deutsche Bank AG, the person said. Earnings Potential In secondary markets, IBM's $3 billion of 5.7 percent bonds due in September 2017 yielded 6.8 percent, or 305 basis points more than similar-maturity U.S. Treasuries at 12:20 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The spread was 139 basis points when the debt was issued in September 2007. IBM last issued bonds in July, when it sold $1 billion of 3.375 percent, three-year floating-rate notes. The company's preliminary third-quarter earnings report yesterday, which precedes IBM's full results on Oct. 16, helped soothe concern that the global financial crisis would hurt the company. Profit last quarter increased to $2.05 a share, excluding some items, topping the $2.01 average estimate of analysts in a Bloomberg survey. Profit for the year will be at least $8.75 a share, IBM said yesterday in a statement, reaffirming a previous forecast. To contact the reporter on this story: John Detrixhe in New York [EMAIL PROTECTED] Last Updated: October 9, 2008 16:03 EDT --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more. -~----------~----~----~----~------~----~------~--~---
