Dell Bonds Get Hammered Amid Buyout-Talk Reports
By Katy Burne and Patrick McGee
Dell Inc. bonds fell sharply Monday and the cost to insure them against default soared amid reports that the computer maker is in buyout talks.
- dapd
Five-year protection sold in the form of credit-default swaps rose to 285 basis points from 197 basis points, equivalent to a rise of $88,000 a year to insure $10 million worth of the debt, according to Markit data.
Meanwhile, Dell’s 5.875% bonds coming due for repayment on June 15, 2019, were seen trading at 110.525 cents on the dollar, down from 118.555 late Friday, according to data provider MarketAxess.
The drop is substantial for such a short time period and a single-A-rated company that is comfortably in investment-grade territory. The yield on the 2019 debt, which moves inversely to its price, rose to 3.669% from 2.309% as of Friday.
Andrew Brenner, global head of international fixed income at National Alliance, said Dell bonds are “becoming toxic” on the buyout rumors. “In order for Dell to go private, they’d have to issue debt and buy back stock. Leverage ratios would go through the roof,” Mr. Brenner warned.
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