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Cat sells bonds worth $3 billion

Bloomberg says Caterpillar’s sale yesterday of $3 billion in bonds will help it pay for debt coming due this year.

The $3 billion of bonds the Peoria, Illinois-based Caterpillar sold yesterday in three issues will bolster the $7.3 billion of committed credit facilities and $2.7 billion of cash the company can use to meet its maturities this year, said Bruce Clark, a corporate debt analyst with Moody’s in New York.

“It’s very constructive,” Clark said in a telephone interview yesterday. “It goes a long way toward addressing the liquidity shortfall.”

Cat’s stock is in raging-bull mode today, apparently for the simple reason that it was able to find buyers for these bonds.

The bond sales included $1.65 billion of five-year, 6.125 percent notes and $1 billion of 10-year, 7.15 percent debt, both of which were priced to yield 425 basis points more than Treasuries of similar maturity. The company also sold $350 million of three-year, 5.75 percent securities at a spread of 437.5 basis points. A basis point is 0.01 percentage point.

The spread is the risk premium Cat has to offer to entice bond buyers. Cat paid a bit less this time than it did for bonds sold in December, but still more than last September (apparently before all hell broke loose).

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Tom Mangan posted at 8:27 am February 6th, 2009 |

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