Update 23 Nov 2015.
As reported in YieldReport last week, Intel Corporation, one of the world’s largest manufacturers of semi-conductors and computer chips is to issue a new benchmark sized Australian dollar corporate bond (or medium term note).
The 4 year December 2019 floating rate tranche has price guidance of 3m BBSW+90bps and the 7 year December 2022 fixed rate tranche has price guidance of 3m BBSW + 130bps.
Deutsche Bank and Westpac are joint lead managers on the issue with the notes expected to be rated A1 (Stable) by Moody’s, A+ (Stable) by S&P, and A+ (Stable) by Fitch.
Nov 2015
Intel Corporation, one of the world’s largest makers of semi-conductors and computer chips, has arranged a conference call with Australian investors as it explores issuing a new benchmark AUD bond. The bond would be the company’s first non-USD denominated corporate bond and would be seen as a further endorsement of the Australian debt markets. YieldReport readers will recall that earlier this year, tech giant Apple Inc. issued $2.25 billion dollars of bonds in three tranches in a landmark deal that demonstrated the depth and quality of the local bond market.
The conference call is being conducted at 11:30am AEDT today by investment bankers from Deutsche and Westpac and has investors excited that another quality corporate name might issue paper in Australia. Bond investors have long lamented that it is difficult to invest broadly in names outside of the banking and financial services industries and so the Apple issue in August was welcomed heartily. Any issue by Intel would be similarly welcomed although it is important to note the bond market has risen significantly since then.
While the Apple issue priced in line with the yield curve of Apple’s US issues the Intel issue may not be as desirable. The Intel 2.45% July 2020 bond is understood to swap back into AUD below 5 year unsecured debt of the four major banks although any potential pricing as yet has not been released. Intel is rate A+/A1 (S&P/Moody’s) compared to the four majors that are rated AA- or similar from Moody’s.
Intel’s previous bond issues are understood to all be in excess of $USD1 billion and it would be anticipated that the proposed transaction would be as well. Like Apple, Intel has a large amount of USD sitting outside the US, money which if brought back into the US would immediately attract US tax at a corporate tax rate of 35%. The solution used by Apple and others to avoid this tax is to leave the funds offshore, borrow the money (with interest being tax deductible) and use the funds to expand the business, or conduct share buy-backs.
The activity, while perfectly legal, has attracted criticism from a range of quarters. Critics say that the US is missing out on tax revenue and that money channelled into buybacks is non-productive and simply fuels share price bubbles that benefits executives whose remuneration is tied to share prices and earnings per share.