Bloomberg News

Burlington Northern, Heinz Plan Debt Amid Record-Low Yields

February 28, 2012

Burlington Northern Santa Fe (BNI), the railroad that Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) bought in 2010, and H.J. Heinz Co. are among borrowers selling bonds as investment-grade yields fall to the lowest on record.

Burlington Northern may issue 10- and 30-year notes in benchmark size, typically at least $500 million, said a person with knowledge of the offering. Ketchup-maker Heinz may sell $600 million of notes, a separate person said. Both people declined to be identified as terms aren’t set. Phone operator Deutsche Telekom AG (DTE) is also planning a $2 billion bond sale.

The companies are accessing capital markets as borrowing costs for investment-grade issuers tumble to 3.44 percent as of yesterday, the lowest in data going back to October 1986, according to Bank of America Merrill Lynch. Investor demand for the assets is increasing as the Federal Reserve pledges to hold interest rates near zero percent through at least late 2014 and European debt woes increase the appeal of safer assets.

Burlington Northern, based in Fort Worth, Texas, last sold bonds in August, issuing $300 million of 4.95 percent, 30-year bonds and $450 million of 3.45 percent, 10-year notes, according to data compiled by Bloomberg.

Heinz sold $700 million of notes in September in its first offering since July 2009, Bloomberg data show. The Pittsburgh- based company split the sale between $300 million of 2 percent, five-year notes and $400 million of 3.125 percent, 10-year notes, the data show.

Deutsche Telekom, Germany’s largest phone company, may offer $1 billion of five-year notes that yield 153 basis points more than similar-maturity U.S. Treasuries and $1 billion of 30- year debt that pays a spread of 190 basis, said a person with knowledge of the offering, who declined to be identified because terms aren’t set. The Bonn-based company last accessed the dollar bond market in April, selling $1.25 billion of five-year notes, Bloomberg data show.

A basis point is 0.01 percentage point.

To contact the reporter on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net

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


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