Mylan Inc. (MYL), Rite Aid Corporation (RAD): Five Companies That Beat Last Week’s Rate Hike

Last week’s new corporate bond issues totaling nearly $17 billion marked four consecutive weeks below $20 billion. However, just three of the biggest borrowers made up more than half the total. All of the borrowers mentioned below priced their deals before the Fed’s meeting last week and the subsequent rate run-up, which probably saved them several basis points on discount pricing and or coupon rates. Here are a few of the week’s highlights.

With $6.25 billion in new paper, Chevron Corporation (NYSE:CVX) covered more than one-third of last week’s new issues all by itself. The company sold tranches of three-, five-, seven-, and 10-year paper and is using the money for paying down commercial paper and general corporate purposes.

Ingersoll-Rand PLC  (NYSE:IR) pumped out $1.55 billion spread over three issues with maturities ranging from 5.5 to 30 years. The money is being used to redeem $1.26 billion of 6% and 9.5% paper and to fund a commercial and residential security business spinoff. Even with the increase in debt face value, the debt service on the new notes will save Ingersoll-Rand PLC  (NYSE:IR) about $40 million per year compared to the debt being redeemed.
Mylan Inc. (NASDAQ:MYL)
Mylan Inc. (NASDAQ:MYL) prescribed three- and five-year note issues totaling $1.15 billion. The money is being used to repay some term loans. In the press release, Mylan Inc. (NASDAQ:MYL) says it’s also increasing the size of its credit facility and redeeming some 7.625% notes issues maturing in 2017. A search at FINRA turned up two of the issues with a combined $1.1 billion outstanding. When the dust settles from issuing new debt and paying off existing debt, Mylan Inc. (NASDAQ:MYL) will save more than $50 million per year in debt service.
Rite Aid Corporation (NYSE:RAD) stocked the paper aisle with $810 million of eight-year, 6.75% notes that are being used to fund a tender offer for some 9.5% notes. The refinance will save Rite Aid Corporation (NYSE:RAD) about $20 million per year.

Continuing with the refinance theme, Agilent Technologies Inc. (NYSE:A) measured out $600 million of 3.875% 10-year paper. The money goes toward redeeming $250 million of maturing notes and “general corporate purposes, including payment of costs associated with its previously announced targeted restructuring program and to repurchase outstanding shares of its common stock pursuant to its existing stock repurchase program.” Unlike most recent refinance deals, this one increases Agilent Technologies Inc. (NYSE:A)’s debt service costs by about $17 million per year.

Even with the increase in bond yields over the past month or so, many companies are still able to save millions with refinance deals. Only time will tell whether that continues and whether the low volume of new deals is temporary or a long-term trend.

The article 5 Companies That Beat Last Week’s Rate Hike originally appeared on Fool.com and is written by Russ Krull.

Russ Krull owns shares of Chevron. The Motley Fool recommends Chevron.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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