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By Marine Cole
Issuance of corporate bonds is reaching new heights this month as the cost of debt continues to fall for US companies.
Issuance of $85.7 billion in July exceeded the previous high of $71.1 billion for the month set last year, according to data by Bloomberg.
The average cost of borrowing fell to 5.04 percent, the lowest since April 2004, and down from the January 2010 high of 5.75 percent, according to Bank
of America Merrill Lynch's US corporate & high yield index. Bloomberg reported Friday that such a decline would save issuers about $7.1 million of
interest per $1 billion of bonds.
McDonald's took advantage of such conditions this week, raising $450 million of 10-year bonds at 3.5 percent, a record low in at least 15 years for a
corporate issuer. To put this into perspective, the US government paid more than 3.5 percent for its 10-year debt as recently as May, the Wall Street
Journal reported.
In mergers and acquisitions, there was plenty of activity in the US this week. Toolmaker Stanley Black & Decker, which merged earlier this year,
continues to expand with the acquisition of CRC-Evans International, which supplies tools and equipment for the construction of oil and natural gas
pipelines. It paid $445 million in cash to a group of investors led by private equity firm, Natural Gas Partners.
Avis Budget Group announced a $1.3 billion takeover bid for Dollar Thrifty Automotive. The transaction, at $47 a share, is higher than the $40 a
share bid Hertz Global announced in April. The deal will no doubt receive intense anti-trust scrutiny.
Walt Disney finally agreed to sell Miramax Films to an investor group for about $660 million after a six-month bidding process.
The largest deals, however, were found abroad. A consortium led by a Hong Kong billionaire agreed to buy the UK networks of French power group EDF for
$9.1 billion
In telecom, Telefonica announced plans to acquire the remaining 50 percent interest in Brasicel, which it didn't already own, for EUR 7.5 billion ($9.8
billion).
The transaction brings worldwide acquisition activity in the telecom space to $117.9 billion, or 10 percent of all M&A, the highest percentage
since the same period in 2006 and up from only $35.4 billion during the same period in 2009, according to data provided by Thomson Reuters.
"Acquisitions of telecom targets is currently the second largest industry for Spanish acquirers, totaling $10.5 billion, and it accounts for 18 percent
of all 2010 acquisitions by Spanish companies," Thomson Reuters said in a report this week. This activity is up from $33.2 billion for the same period
in 2009 and the highest year-to-date level since 2000.
Some of the largest telecom acquisitions so far this year have included the $27.5 billion acquisition of Mexico-based Carso Global Telecom by America
Movil, the $22.4 billion (including assumption of debt) acquisition of Qwest Communications by CenturyLink in the US, and the $10.7 billion acquisition
of Zain Africa in Nigeria by Bharti Airtel.
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