A handful of major U.S. companies have issued new debt recently, seeking to raise hundreds of millions from investors to pay back old debt and exploit currently low interest rates, which are stimulating the corporate bond market.
The companies come from a variety of industries, from the gold mining sector to the fast-food and soft drink industries.
Barrick Gold Corp. (TSE:ABX), the world's largest gold mining company, said Friday it is offering $3 billion in new equity (stock) to help slim its longstanding corporate debt, of which $1.3 billion is maturing by 2015.
Of the $3 billion raised and underwritten by banks, including Barclays PLC (LON:BARC), $2.6 billion will pay back short-term debt, some of which matures in 2014. Barrick’s related offer to buy back its old debt expires on Dec. 2, for its investors who already hold some Barrick corporate bonds (notes).
The company has made $5.2 billion in proceeds from long-term debt in 2013 so far, according to company filings. The company took on $3 billion more in debt earlier this year, in May, and is among the most heavily indebted of gold mining companies.
The Coca-Cola Company (NYSE:KO), the world's largest beverage company, is also raising $5 billion in debt, with some maturing as early as 2016, to help fund repayment or redemption for the company’s $3 billion in debt coming due in 2013 and 2014.
For context, Coke booked $35 billion in net revenue in the first three quarters of the year. The company holds about $36 billion in debt, according to Morningstar.
Companies like fast-food giant Yum! Brands Inc. (NYSE:YUM), owner of KFC and Pizza Hut, have instead issued new debt to pay back old debt, a common corporate tactic.
In a regulatory filing on Thursday, Yum! confirmed its issuance of $600 million in notes due in 2023 and 2043, to help buy back $525 million of its older corporate debt.
High-rated companies sold more corporate bonds in September 2013 than in any month in 18 years, reported the Wall Street Journal, buoyed partly by very low interest rates this year, now under threat by the Federal Reserve’s tapering talk.
Corporate bonds typically offer more return to investors, compared to low-yield U.S. Treasury bonds.
“We continue to think the corporate bond market will recover,” wrote Morningstar analyst Dave Sekera earlier this week. “With fund flows into bond funds returning to positive territory and the Fed's quantitative easing increasingly removing Treasuries and mortgage-backed bonds from circulation, demand for corporate bonds will continue to improve.”
Starbucks Corporation (NASDAQ:SBUX) and Verizon Communications Inc. (NYSE:VZ) sold corporate bonds in September, with Verizon’s $49 billion sale counting as the largest corporate bond sale ever.