Cisco Shops a New Bond Offering
From the Buzz & Banter: Here's another example of financial engineering.
Cisco (NASDAQ:CSCO) is shopping a 7-part senior bond deal today consisting of 18-month floating, 3-year fixed and floating, 5-year fixed and floating, and 7-year and 10-year fixed notes. The deal is being done to roll $3.75 billion in existing debt that is maturing next month, and in November later this year. Additionally, the new debt will be used to fund its existing $15 billion buyback plan (announced Nov. 11, 2013) and fund cash dividends (Cisco just increased its quarterly dividend to $0.19 from $0.17 two weeks ago, or a 3.44% annual yield). Hey, at least the company is being honest.
Initial price targets are actually a little wider than I would've thought. Last week, Google (NASDAQ:GOOG) -- which is also AA rated -- sold 10-year notes at 62.5bps over Treasuries. Cisco is currently going to have to pay +105bps. I'll be interested to see where the floaters price at to get a sense of how much interest rate/duration risk "fear" there is. More importantly, when we stop seeing issuance for financial engineering purposes like this -- if companies have access to capital markets, they may as well make use of it, no harm no foul there -- we'll know that there is going to be growth acceleration. Companies need to be spending money for capital equipment and business investment.
Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Daily Recap Newsletter