Baxter Leads Another Busy Day for U.S. Corporate Bond Issuance

   By Mike Cherney 
 

Highly rated companies are seeking to borrow at least $2.8 billion on Wednesday, adding to the more than $14 billion in investment-grade bonds sold earlier this week.

Leading the day so far is health-care company Baxter International Inc. (BAX), with a two-part $750 million sale, offering 10- and 30-year maturities. The company will use the proceeds for general corporate purposes, including capital expenditures to "support longer-term growth of our plasma-based treatments," according to a bond prospectus.

Insurer MetLife Inc. (MET), soft drink maker PepsiCo Inc. (PEP) and pipeline operator Kinder Morgan Energy Partners LP (KMP) plan to borrow $500 million each, with maturities ranging from three to 30 years. Kinder Morgan will use the proceeds to pay a portion of a $6.22 billion pipeline acquisition from its general partner, Kinder Morgan Inc. (KMI).

Diversified manufacturer Leggett & Platt Inc. (LEG) plans to borrow $300 million via 10-year notes, and real estate firm Essex Portfolio LP (ESS) plans to issue $250 million also for 10 years.

In the first seven days of August, investment-grade companies borrowed more than $15 billion, significantly more than the same period last year, when they borrowed $10.2 billion, according to data provider Dealogic.

Two years ago, however, companies with investment-grade credit ratings borrowed nearly $34 billion over the same period. Low rates make it enticing for companies to refinance existing debt and take out new loans.

That has given some investors pause.

"These longer-dated bonds are probably dangerous at this stage in the economic cycle," said William Larkin, fixed income portfolio manager at Cabot Money Management. "We have very low coupons and long maturities, and that can be a recipe for a disaster if we get a stronger economic recovery."

In the high-yield market Wednesday, cable operator Charter Communications Inc. (CHTR) is planning to sell $1 billion in 10-year notes through two subsidiaries.

Write to Mike Cherney at [e-mail]

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