rd80 (99.12)

Big Week in Bonds and a new CAPS Pick

October 22, 2012 – Comments (0) | RELATED TICKERS: HCA , VTG

Corporate bond issues picked up the pace last week with over $40 billion of new credit.

Big borrowers included Oracle ($5 billion), Xstrata ($4.5 billion), HCA Holdings ($2.5 billion), JPMorgan Chase ($2.85 billion), UnitedHealth Group ($2.5 billion) and Russia-based Sberbank ($2 billion).

The HCA deal included a page from the private-equity playbook by using some of the new debt to finance a dividend to stockholders.  No surprise since many of the major holders are private equity firms.  HCA also upped the deal from the initial filing of $2 billion to $2.5 billion in the final filing.

Companies based outside the US accounted for 40% of the borrowing and junk issues made up about a quarter of the total.  Those two categories aren't mutually exclusive.

There were several companies that increased the size of their offerings from their initial announcements.  I haven't been following that closely, so can't say if it's been common.

The new CAPS pick?  A green-thumb on Vantage Drilling (VTG).  Vantage is far from the stodgy ol' dividend stocks I like.  No dividend and plenty of risk.  Vantage is about a $550 million market cap company that issued over a billion dollars in high-yield, aka junk, paper.  The part that triggered risking CAPS points is the new paper being used to refinance existing, higher coupon junk.  Vantage will save over $30 mil per year with the refi.  That's about what the company has been losing.  Add in a new drillship coming on line and there's good potential for the company to start turning a profit.  I may put a little gambling money on this one after doing some more research and when my Foolish disclosure trading black-out clears.  Re-emphasizing - speculative. 

As always, questions or comments welcome here or at the article.

Fool on!

Russ

Disclosure:  No position in any company mentioned ... yet.