Monday, August 23, 2010

Norfolk Southern Launches 100-Year Bond at 5.95%

Inflation? What inflation?

Dow Jones Newswire:

"NEW YORK (Dow Jones)--Norfolk Southern Corp.'s (NSC) reopening of its 100-year bond, first issued in March 2005, has launched at 5.95%, inside price talk of 6%, according to a person familiar with the sale. The sale has also been upsized to $250 million from original guidance of around $100 million.

"The Norfolk, Va.-based railroad's new senior fixed-rate bonds, which come on top of the existing $300 million sold in 2005 and also maturing in 2105, are expected to be rated Baa1 by Moody's Investors Service and BBB+ by both Standard & Poor's and Fitch Ratings.

"Bankers have estimated the issuer will need to pay a premium of roughly 0.75 percentage points more than what it would cost them to sell 30-year debt. The original deal from 2005 sold at par with an interest rate of 6%, and with a spread over Treasurys of 1.37 percentage points. Another 100-year bond the company sold in 1997 for $350 million, which was part of a $4.3 billion deal, had a spread of 0.97 percentage point over Treasurys.

"Goldman Sachs is lead bookrunner on Monday's sale, proceeds from which will be used for general corporate purposes, according to the person familiar with the sale.

"A spokesman for the issuer said its "decision to reopen the 100-year bonds was based on the current low [interest] rates, coupled with the strong appetite among buyers for them."

"Bankers have been pitching century bonds selectively in recent weeks because Treasury rates are so low that issuers can lock in 100-year financing at reasonably attractive rates. At the same time, investors are sitting on piles of cash and looking to put it to work in corporate bonds, where they are seeking longer-dated assets that give them higher yields." [The article continues.]

Norfolk Southern dates back from the early 19th century, by the way.

Japan has a 100-year, multi-generational mortgage. But that is the country whose oldest firm started over 1,400 years ago and remained operational until 2006. The hotel that started 1,300 years ago is still in business. They could have floated a 1,000-year bond...


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