Acco Brands plans to issue debt as borrowing costs fall
Acco Brands Corp., the maker of Swingline staplers, is marketing notes due in 2015 as high-yield, high-risk companies seek to take advantage of lower borrowing costs for speculative debt.
Acco Brands plans to sell $425 million of senior secured notes, the Lincolnshire-based company said in a Sept. 14 statement. Proceeds will be used to repay borrowings under Acco's existing credit and securitization facilities, the company said.
The offering may price as soon as today and the securities may pay a yield of 11 percent to 11.25 percent, according to a person familiar with the offering who declined to be identified because terms aren't set. Spreads on high-yield, high-risk bonds tightened 80 basis points last week to 798 basis points on Sept. 18, according to Merrill Lynch's U.S. High Yield Master II index.
"When issuers are refinancing this bank debt with bonds, covenants aren't going to be nearly as restrictive," said Jeremy Hughes, a high-yield portfolio manager with Aviva Investors in Chicago, which oversees more than $40 billion of assets in North America. "So they can muddle along the bottom for awhile and let the economy eventually come back."
The world economy "does not appear to be falling into an abyss but is still" in trouble, said Paul Krugman, the Nobel Prize winning economist. "The end of the world appears to have been postponed," Krugman, a professor at Princeton University, said at a seminar in Helsinki today.
There were at least 14 high-yield debt transactions last week totaling $7.4 billion, and at least 37 investment-grade issues with a combined value of $35 billion, according to data compiled by Bloomberg.
High-yield, high-risk, or junk, bonds are rated below Baa3 by Moody's Investors Service and BBB- by Standard & Poor's.
Citigroup Sale
In the last week's investment-grade U.S. corporate-bond market, Citigroup Inc. sold debt with and without U.S. backing.
Citigroup, the biggest user of the U.S. government's Temporary Liquidity Guarantee Program, sold $5 billion of TLGP- backed debt in a three-part offering of two- and three-year notes, Bloomberg data show. The fixed-rated debt priced at spreads from 32.7 basis points to 49.4 basis points.
The New York-based bank also sold $2 billion of five-year notes that aren't guaranteed by the Federal Deposit Insurance Corp. That issue priced at 99.5 cents on the dollar to pay a spread of 325 basis points, Bloomberg data show.
Yields on investment-quality bonds narrowed 11 basis points relative to benchmark rates to 233 basis points on Sept. 18, according to Merrill Lynch's U.S. Corporate Master index. A basis point is 0.01 percentage point.
Debt issuance of $42.4 billion last week compares with $29.3 billion the week before, according to data compiled by Bloomberg. This year's sales total about $936 billion, compared with $679 billion during the same period of 2008, the data show.
Issuers are marketing at least $4.3 billion of dollar- denominated debt, Bloomberg data show. Following is a description of pending sales of corporate and other bonds in the U.S.