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Another important offer of bonds arrives on the market, the second in two days.
IBM
sells $ 20 billion worth of bonds to finance its purchase of
Red Hat.
The receipt of this debt, however, was a little colder than the first.
The story back. IBM's bond offering (symbol: IBM) has little effect
Bristol-Myers Squibb
of the
(BMY) Tuesday's sale will become the biggest deal of this year and the 10th largest ever.
The $ 34 billion acquisition of Red Hat (RHT) is a key component of IBM's growth plan for the growing cloud computing industry. The company's legacy mainframe business is slowing this year – which was widely expected – and is turning to growing its cloud and software businesses.
What's up. Big Blue Wednesday sold eight tranches of fixed and floating rate bonds maturing in 2 to 30 years.
Demand was relatively moderate compared to other bond sales this year. The order book was about double the supply, while the average transactions this year attracted orders more than three times greater than the final sale.
The $ 19 billion Bristol-Myers deal, which has been hedged more than three times, has probably discouraged IBM's bid. However, investors have also expressed concern about the company's plan to reduce debt, although IBM plans to end redemptions in 2020 and 2021 to pay down debt.
Look forward. IBM has promised to redeem the premium bonds if the deal with Red Hat was not finalized before April 28, 2020. The 10-year bond sales segment was backed by a 1-year return. , 05 percentage point higher than that of the Treasury, the same prevalent as the Bristol-Myers affair.
However, Bristol-Myers and IBM may not present a comparable risk. On the one hand, the short-term debt issued by the drug maker sold to Treasury bonds with narrower spreads than IBM's, which implies a lower risk short term. And overall, the pharmaceutical industry is facing price pressure this year, says S & P ratingwhich means that drug makers such as Bristol-Myers could see their ratings downgraded.
Write to Alexandra Scaggs at [email protected]
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