GM's bond yields remain well below earnings yield of common stock (earnings/price), implying stock buybacks continue to be a better use of cash than paying down debt:
GMAC global issue two-times oversubscribed
NEW YORK, Nov 2 (Reuters) - Investor demand for the global
bond issue of General Motors Corp. unit General Motors
Acceptance Corp., priced on Monday, was double the issue's $1.25
billion size, and avid buying was seen from outside the U.S., a
Merrill Lynch official said.
"We were two-times oversubscribed, and from our perspective
the most important thing is that over 30 percent of the issue was
placed outside the U.S., far and away the biggest percentage on a
corporate global in quite some time," the official said.
Merrill Lynch was co-lead manager of the single-A-rated
offering with Salomon Smith Barney. The issue, which was first
announced on Friday, was increased from initial plans for $1
billion.
The bonds carry a 5.75 percent coupon, priced to yield 5.84
percent, or 134 basis points over Treasuries. The yield spread
was one point narrower than the initial guidance, another sign of
strong demand.
"This shows that both sides of the Atlantic are again
focused on corporate product," the official said, adding that
most of the non-U.S. investors were in Europe, with a small
portion in Asia.
A total of over 200 investors bought the bonds, ranging
from middle-market to major U.S. institutions, he said.
GMAC last tapped the global bond market in August with a $1.0
billion issue of five-year floating rate notes carrying an
interest rate of 10 basis points over Libor.
(( Terence Gallagher, US Corp Bonds Unit, 212-859-1674 )) |
