Deals ranged in size from $75 million raised by Aqua America Inc. in Bryn Mawr to $2 billion brought in by DuPont Co. in Wilmington. The total raised regionally was $3.5 billion.
"All these companies that needed money last year that couldn't access it have pent-up demand," Megan Rutt, a managing director at Janney Montgomery Scott in Center City, said yesterday, speaking generally about the bond market. "That's been matched by investors' willingness to lend," she said.
That demand by investors is driving down interest rates on corporate debt, which are typically measured in comparison to U.S. Treasury bonds. That difference is called the spread.
In December, investment-grade companies had to pay 6 percent more than the comparable Treasury to borrow money, said Roger Early, co-chief investment officer for fixed income at Delaware Investments in Center City. "Today that spread is 2 percent," he said.
Because the Federal Reserve is determined to keep interest rates low to help spur the economy out of recession, the interest rates that corporations must pay look very good in historical terms, Early said. "If you can issue at 5 percent, that's an attractive level," he said.
DuPont got rates of 3.25 percent on $1 billion in debt due in 2015 and 4.63 percent on $1 billion in debt due in 2020. Another chemical company, FMC Corp. of Philadelphia, secured a 5.2 percent interest rate on $300 million in notes due 2019.
Some companies remain stuck with high rates, even when they issue new debt. Money-losing Rite Aid Corp., for example, is paying 10.25 percent on $270 million in senior notes used to refinance debt based on accounts receivable.
Refinancing is the biggest use of the money from new issues, Rutt said, but some is going to pay for acquisitions.
That is what Dollar Financial Corp. of Berwyn planned to do with the proceeds from the sale of $250 million in notes it proposed this month.
But Standard & Poor's threw cold water on the plan, saying it would cut Dollar Financial's credit rating, making it more expensive for the company to borrow if the sale of notes went through.
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Haven't filed your income tax forms yet? Time is running out. Forms are due by the end of April 15. Click here for what you'll need to know, where you can turn for advice or to ask questions of local CPAs Mark Zinman and Jim Newhard.
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