[NEW YORK] Siemens AG raised US$7.75 billion in its biggest dollar bond sale giving Europe's largest engineering company cash it needs to expand into the oil-and-gas equipment business in the U.S.
"For all the worries stock investors have, this is a near US$100 billion company with incredible cash flows, ability to service debt and a diversified business," said Karissa McDonough, who helps oversees US$5.5 billion in assets at People's United Wealth Management in Burlington, Vermont.
Chief Executive Officer Joe Kaeser, who is focusing Munich- based Siemens on energy generation and distribution, agreed to purchase oil-and-gas equipment specialist Dresser-Rand Group Inc for US$7.6 billion in September. Since then oil has plunged 35 per cent. And Siemen's shares have underperformed the 23.3 percent gain in the broader German market, increasing pressure on the company to cut costs.
The six-part note sale's longest portion, a US$1.75 billion 4.4 per cent 30-year bond, sold at a yield of 1.4 percentage points more than comparable Treasuries, according to data compiled by Bloomberg. That's as much as 0.2 percentage point less than where the company initially marketed the debt, according to a person with knowledge of the deal. Proceeds may finance recently announced acquisitions and be used for general corporate purposes.
"With the strong dollar and higher rates, investors want U.S. denominated assets," said Jody Lurie, a corporate-credit analyst at Janney Montgomery Scott LLC in Philadelphia, which manages US$61 billion in assets.
Siemens also sold US$1.25 billion of three-year fixed-rate debt, US$500 million of three-year floating-rate notes, US$1 billion of five-year securities, US$1.75 billion in seven-year bonds and US$1.5 billion of 10-year notes.
Barclays Plc, Citigroup Inc, Deutsche Bank AG, Goldman Sachs Group Inc and JPMorgan Chase & Co, arranged the debt sale.
"The larger question for bond investors is will they retain their conservative financial profile, and one acquisition isn't going to change that," Joe Mayo, the head of credit research at Conning, a global insurance investment manager with about US$92 billion under management, said in a telephone interview.
The company is rated A1 by Moody's Investors Service, its fourth-highest grade, and an equivalent A+ by Standard & Poor's.
Mr Kaeser has been reducing costs as he faces pressure from investors after his decision to buy Dresser-Rand. The company has cut 13,100 jobs since December - representing about 4 percent of the workforce - seeking to achieve 1 billion euros in annual savings by next year.
"They have so little US debt outstanding that it is almost like a new issue coming to market, and with the lack of secondary trading opportunities it makes the bonds that much more attractive," said Mr Mayo.