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FT: Big Companies Rushing to Sell Corporate Debt Before Rates Rise

By    |   Thursday, 05 Sep 2013 11:57 AM

Large companies are piling into the U.S. debt markets this week, trying to get ahead of a Federal Reserve meeting that could precipitate interest rate increases and potential fallout from jobless figures due out Friday, the Financial Times reported.

Big corporate borrowers, including Home Depot, Starbucks, Caterpillar and Unilever, have entered the U.S. markets with new debt deals, selling a combined $10 billion worth of securities, according to data from Dealogic.

Other companies such as Lowe's and Nabors Industries added another $6 billion in debt offerings to the pileup.

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"This month is shaping up as a very busy one," Justin D'Ercole, head of the Americas investment grade syndicate at Barclays, told the Times.

"There is a lot that could impact markets and rate-sensitive clients, such as the jobs report, Fed and ECB [European Central Bank] meetings and additional supply. It's not an easy window, but many clients may prefer to come with supply now, rather than try to forecast what the market is going to look like in a couple of weeks."

The Times reported the beehive of activity came after a slump that brought new debt offerings almost to a standstill ahead of the Labor Day holiday.

Dealogic estimated a combination of low borrowing costs and strong demand for corporate alternatives to government bonds have sent sales of dollar-denominated investment grade debt, excluding financials, to $448 billion in 2013.

"One thing we know is that interest rates are going to be even higher one year from now," D'Ercole noted. "For many companies, this may be a good time to come to markets."

Sprint Corp. sold $6.5 billion of below-investment-grade bonds this week, in what by Dealogic estimates could be the largest "junk" debt offering by a company, The Wall Street Journal reported.

The Sprint deal came amid a particularly heavy period of financial activity in the global telecom sector.

Verizon Communications announced a $130 billion agreement to purchase the 45 percent of Verizon Wireless it doesn't already own from Vodafone Group PLC., and observers predicted part of that deal would be financed by corporate debt issuance as well, the Times stated.

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Large companies are piling into the U.S. debt markets this week, trying to get ahead of a Federal Reserve meeting that could precipitate interest rate increases and potential fallout from jobless figures due out Friday, the Financial Times reported.
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2013-57-05
Thursday, 05 Sep 2013 11:57 AM
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