IBM Shows Credit Markets Aren’t Entirely Closed (IBM)

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IBM (NYSE: IBM) is showing that some companies can still raise cash in these troubled times.  Big Blue is selling $4 billion in debt in a multiple maturity offering.  The company is showing that the credit market terms may not be ideal but the credit markets are at least somewhat available for strong companies.

It appears that the company is selling 5-year noted at a spread of387.5 basis points over treasuries.  The deal spread for a 10-yearissuance was also at a spread of 387.5 basis points over treasuries,and its 30-year component has a spread of 400 basis points overtreasuries.  The implied coupons from the filing show 6.50% for the 5-year,  7.625% for the 10-year, and 8.00% for the 30-year offering.

Underwriters are B of A, Barclays, Credit Suisse, and Deutsche Bank.  Co-managers are listed as BNP Paribas Securities, HSBC Securities (USA), Mitusbishi UFJ Securities, Mizuho Securities, Morgan Stanley, and USB Securities LLC.

What is interesting here is the ramifications for the issue.  Investors may be tight on capital and trying to hoard cash.  But this is showing that some funds can be put to work.  Companies like IBM paying essentially 4% higher than treasuries is atrocious under historical spread standards.  In today’s climate it isn’t all that bad.  Sometimes a small loss has to be considered a victory.

Jon C. Ogg
October 10, 2008