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Putting the Leverage in Leveraged Buyouts



March 25, 2013 – Comments (4)

Not a lot of excitement in last week's new bond issues.  The most interesting issues were NBC Universal and Heinz each borrowing a few billion to help fund the buyouts by Comcast for NBC Universal and Berkshire Hathaway and private equity firm 3G Capital for Heinz.

One observation was St. Jude Medical (STJ) is using part of its borrowing to redeem a note that doesn't mature until 2019 and doesn't carry a much higher coupon than the new borrowing.  Looks like someone decided to lock in rates now rather than gamble on where they'll be six years from now.

CAPS blog bonus observation - a Japanese insurance company, Sompo Japan Insurance, floated a $1.4 billion, 60-year bond.  Very long maturity bonds pop up every now and then, but they're not real common.  Sompo is paying a coupon of 5.325% for ten years, then they go to a floating rate.  The bonds were a private issue and will be listed on the Singapore exchange - well outside my investing wheelhouse.  Here's the press release for anyone interested in reading more.

Fool on!


4 Comments – Post Your Own

#1) On March 25, 2013 at 5:31 PM, awallejr (34.17) wrote:

All I can say is who would want to buy a 60 year bond and without knowing what interest rate will be paid on it down the road.

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#2) On March 25, 2013 at 7:03 PM, Option1307 (30.54) wrote:

Thanks for the info!

60years...? Holy cow no thanks! 

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#3) On March 25, 2013 at 8:18 PM, rd80 (95.74) wrote:

Yeah, I don't think there's much demand for a 60-year piece of paper from individual investors.  The market for those is typically insurance companies, trust funds or other financial companies/funds with long time horizons.

Two years ago or so, Norfolk Southern issued a 100-year bond and Goldman rolled out some 50-year paper.   The ultra-long term stuff is out there, you just don't see issues very often.

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#4) On March 25, 2013 at 8:43 PM, rd80 (95.74) wrote:

Link to the article didn't take.  Here's one that works.

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