Investors flock to Dell’s $20bn bond deal

Dell sold $20 billion of bonds to back its takeover of EMC Corp. in what’s the year’s second-biggest corporate offering.The computer maker received investor orders in excess of $80 billion, allowing the company to increase the deal from $16 billion and reduce the interest rates it offered.

The offering is the largest corporate sale since Anheuser-Busch InBev NV sold $46 billion of notes in January to finance its takeover of SABMiller Plc.

“People are very well prepared for the big deals that we know are coming,” said Timothy Doubek, a money manager at Columbia Threadneedle, which has about $176 billion in fixed-income assets under management. “We’re still in the normal process of starting out with price talk being extremely wide, and everybody knows that it isn’t going to come there and they build a large book and things come with modest concessions.”

The demand allowed Dell to lower the yields on the debt. The longest part of the offering, $2 billion of 30-year bonds, will pay 5.75 percentage points more than similar-maturity Treasuries, the person said. While that's down from an original offer of 6.25 percentage points, it's 3.55 percentage points more than the average spread on all US corporate bonds of similar ratings and maturities, according to Bank of America Merrill Lynch data.

A proposed $4.5 billion 10-year note will yield 4.25 percentage points above government debt, said the person. That’s a premium of more than 1.5 percentage points over comparable notes. The debt was first marketed at 4.75 percentage points.

Bloomberg