Bloomberg News

Intel $5 Billion Bond Sale is First Non-Convert Issue Since ’87

September 14, 2011

Sept. 14 (Bloomberg) -- Intel Corp., the world’s largest chipmaker, sold $5 billion of debt in its first non-convertible bond offering in more than two decades as issuance revives in September with borrowing costs at about record lows.

Proceeds will mainly be used to fund stock buybacks, Santa Clara, California-based Intel said today in a statement distributed by Business Wire. The chipmaker last tapped the market for bonds that aren’t convertible into stock in 1987, according to data compiled by Bloomberg.

PNC Financial Services Group Inc., which is buying Royal Bank of Canada’s U.S. retail banking unit, American Express Co. and mining firm Rio Tinto Plc were among companies that sold $12.2 billion of debt today as yields on investment-grade corporate debt hover within 30 basis points, or 0.3 percentage point, of the lowest on record, Bank of America Merrill Lynch index data show. A combination of the weak stock market and low rates are likely driving Intel’s bond sale, said Rajeev Sharma of First Investors Management Co.

“Any name that hasn’t come to market with typical straight up, fixed-rate debt is pretty well received because there’s demand for a new name, new interest and I think it’s primed to do pretty well,” said Sharma, a money manager who helps oversee $1.5 billion of investment-grade debt. “It’s very cheap financing.”

Intel raised $1.5 billion of 1.95 percent, five-year notes that pay 110 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. A $2 billion portion of 10-year 3.3 percent debt pays a 135 basis point spread and $1.5 billion of 4.8 percent 30-year bonds pay 160 basis points more than the benchmark.

Strong Demand

The company is graded A1 by Moody’s Investors Service and A+ by Standard & Poor’s, Bloomberg data show.

The average A rated bond pays a 217 basis-point spread and the average AA graded company debenture offers a 187 basis-point spread, Bank of America Merrill Lynch index data show.

The chipmaker plans to use remaining proceeds from the sale for general corporate purposes, according to today’s statement.

Yields on investment-grade debt fell to 3.74 percent from 4.1 percent at the start of the year, Bank of America Merrill Lynch index data. That’s up from a record low of 3.45 percent on Aug. 4.

PNC, based in Pittsburgh, sold $1.25 billion of 2.7 percent five-year debt; American Express Credit Corp. issued $1.3 billion of 2.8 percent five-year notes; and Rio Tinto sold $2 billion of 5-, 10-and 30-year debt, Bloomberg data show.

--Editors: Mitchell Martin, Pierre Paulden

To contact the reporters on this story: Sapna Maheshwari at sapnam@bloomberg.net Tim Catts in New York at tcatts1@bloomberg.net.

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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