Bloomberg News

Covidien Sells $1.25 Billion of Bonds to Refinance Current Debt

May 22, 2012

Covidien Plc (COV:US) sold $1.25 billion of three- and 10-year notes to refinance debt due in October at record-low coupons for the maker of surgical accessories and operating-room products, according to data compiled by Bloomberg.

The company’s financing unit, Covidien International Finance SA, issued $600 million of 1.35 percent bonds maturing in 2015 to yield 95 basis points more than similar-maturity Treasuries and $650 million of 3.2 percent notes due 2022 with a 145 basis-point spread. Those are the lowest coupons on record for equal-maturity debt sold by the company, Bloomberg data show.

Proceeds from the sale will be used to redeem its $500 million of 5.45 percent securities issued in May 2008 as well as for general corporate purposes, the Dublin-based company said today in a regulatory filing.

“Covidien bondholders may be able to generate more return for the risk by investing in these new issues,” Julie Stralow, an analyst at Chicago-based Morningstar Inc. (MORN:US), wrote in a note before the deal priced.

The company last sold debt in June 2010, when it issued $1.5 billion of three-, five- and 10-year bonds, according to data compiled by Bloomberg. The 1.875 percent notes maturing in 2013 priced to yield 72 basis points more than similar-maturity Treasuries, and the 4.2 percent bonds due in 2020 had a 97 basis-point spread, the data show.

The new debt was rated (COV:US) A by Standard & Poor’s. Moody’s Investors Service graded it Baa1, three levels above junk grade. BNP Paribas SA, Citigroup Inc. and Deutsche Bank AG managed the sale, Bloomberg data show.

Covidien said in December that it would spin off its pharmaceuticals division into a separate company that would be able to better compete in the growing pain-management area.

To contact the reporter on this story: Charles Mead in New York at cmead11@bloomberg.net

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


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Companies Mentioned

  • COV
    (Covidien PLC)
    • $102.7 USD
    • 1.44
    • 1.4%
  • MORN
    (Morningstar Inc)
    • $65.25 USD
    • 0.26
    • 0.4%
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