IBM Prices 10-Year Bonds at Record-Low 1.875% Coupon
07/25/2012| 03:42pm US/Eastern
--IBM sells $1 billion at record-low coupon for 10-year bonds
--Deal sells with 1.875% coupon, beating 2% record
--IBM holds record-low coupons for 3- and 7-year debt
(Updates with final pricing terms in the 1st and 3rd paragraphs.)
By Patrick McGee and Katy Burne
International Business Machines Corp. (>> International Business Machines Corp.), famous for sensing ideal times to tap the bond markets, grabbed a record-low rate on 10-year bonds as it sold $1 billion of notes bearing a 1.875% coupon Wednesday.
The deal marks the fifth time that IBM has sold bonds in the U.S. this year as borrowing costs continue to tumble. IBM's earlier forays into the market have given it two records for lowest-coupon already this year: on three-year bonds, it sold $1.5 billion in February at just 0.55%; and on seven-year debt, it sold $600 million in early May at just 1.875%, according to data provider Dealogic, whose data on coupon records go back to 1995.
The Armonk, N.Y., multinational technology and consulting company priced the 10-year debt to yield 2.053%; it attained a record for the coupon by selling the bonds at a discount. They sold at a dollar price of $98.398 per $100 dollar of face value, giving investors 0.65 percentage point over benchmark Treasury rates, in line with earlier price guidance.
IBM priced the bonds in a week when Treasury yields have broken fresh ground. The 10-year Treasury yield stood at 1.40% in late trading Wednesday. Treasury rates are used as a benchmark for borrowing rates on corporate debt.
The previous record low for a 10-year corporate-bond coupon was set last month at 2% by 3M Co. (>> 3M Co) and Monsanto Co. (>> Monsanto Company), Dealogic data show.
IBM's 2.90% bonds due in 2021 traded last week at $108.346 per $100 of face value, yielding 1.913%, according to MarketAxess.
The bonds are expected to carry ratings of Aa3 from Moody's Investors Service, AA-minus from Standard & Poor's and A-plus from Fitch Ratings.
Citigroup, BNP Paribas, Deutsche Bank and UBS are leading the sale, which is raising money for general corporate purposes. The deal is registered with the Securities and Exchange Commission.
Write to Patrick McGee at email@example.com
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