Issuers utilize note offerings to fund early redemption of outstanding debt

November 3, 2014

Practitioner Insights thumbnail 2(Editor’s Note: This post is an excerpt from an article appearing in Practitioner Insights on WestlawNext)

With the ability to issue debt at more favorable rates, many companies are undertaking registered note offerings with an eye toward using the proceeds from such offerings for the early repayment of other outstanding debt obligations. Verizon Communications Inc. and Ingersoll-Rand PLC recently used this tactic.

Verizon priced a three series-note offering that could raise $6.5 billion. Similarly, Ingersoll-Rand will issue three series of notes collectively valued at $1.3 billion. Each company disclosed that it will use the proceeds from its respective offering to fund the early redemption of previously issued notes.

Taking advantage of favorable interest rates

It appears the main motivation behind these sizeable debt offerings is the ability to obtain more favorable interest rates on the notes issued thereunder. Verizon, for example, plans to issue three series of notes as follows:

  • $1.5 billion in notes bearing interest at 3 percent, which mature in 2021;
  • $2.5 billion in notes bearing interest at 3.5 percent, which mature 2024; and
  • $2.5 billion in notes bearing interest at 4.4 percent, which mature in 2034.

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