Borrowing Rush Kicks Off Post-Labor Day
The post-Labor Day borrowing rush has officially begun, with two of the world’s largest companies, BHP Billiton and Philip Morris International, leading the charge. The two companies are looking to raise a combined $20 billion in debt, with BHP Billiton seeking $15 billion and Philip Morris International looking to raise $5 billion.
BHP Billiton’s Bond Offering
BHP Billiton, the world’s largest mining company, is looking to raise $15 billion in debt. The company is offering a mix of bonds, including $3 billion in 10-year notes, $4 billion in 30-year notes, and $8 billion in 50-year notes. The bonds will be sold in the U.S. and Europe, and will be used to refinance existing debt and fund new projects.
The company is offering the bonds at a spread of 1.5 percentage points over U.S. Treasuries, which is slightly higher than the 1.25 percentage points it paid when it issued $10 billion in bonds in April. The higher spread reflects the current market conditions, which have been volatile due to the ongoing pandemic.
Philip Morris International’s Bond Offering
Philip Morris International, the world’s largest tobacco company, is looking to raise $5 billion in debt. The company is offering a mix of bonds, including $2 billion in 10-year notes, $2 billion in 30-year notes, and $1 billion in 50-year notes. The bonds will be sold in the U.S. and Europe, and will be used to refinance existing debt and fund new projects.
The company is offering the bonds at a spread of 1.25 percentage points over U.S. Treasuries, which is slightly lower than the 1.5 percentage points it paid when it issued $5 billion in bonds in April. The lower spread reflects the current market conditions, which have been relatively stable due to the recent rally in stocks.
Post-Labor Day Borrowing Rush
The post-Labor Day borrowing rush is a common occurrence in the corporate bond market. Companies typically take advantage of the post-Labor Day lull to issue debt, as investors are more likely to be in a buying mood after the summer break.
This year, the post-Labor Day borrowing rush is expected to be even more active than usual, as companies look to take advantage of the current market conditions. With interest rates at historic lows, companies are looking to lock in low borrowing costs for the long term.
Risk Factors
Despite the current market conditions, there are still risks associated with issuing debt. Companies must consider the potential for rising interest rates, which could make their debt more expensive to service. They must also consider the potential for a recession, which could make it more difficult to service their debt.
Outlook
The post-Labor Day borrowing rush is expected to continue in the coming weeks, as companies look to take advantage of the current market conditions. With interest rates at historic lows, companies are looking to lock in low borrowing costs for the long term.
At the same time, investors should be aware of the risks associated with investing in corporate bonds. Companies must consider the potential for rising interest rates, which could make their debt more expensive to service. They must also consider the potential for a recession, which could make it more difficult to service their debt.