The market for pooled, corporate debt is exploding and it leads to deals like this.
Bed Bath & Beyond just raised $1.5 billion in the debt markets, paying +125 bps for 10s, +160 bps for 20s and +185 bps for 30s. In the 10-years, investors are demanding only 3.79% for the bonds, which are rated Baa1 by Moody’s and a suspiciously high A- by S&P after an upgrade today.
The money will be used for share repurchases. The company already has about $861 million remaining on a current buyback program, has bought back $6.6 billion in the last decade and yet the shares have fallen 25% this year. Bed Bath & Beyond pays no dividend so there isn’t much of a cushion for bond holders although BBBY is profitable, a lot can change in 30 years.
The company says the buy-back strategy reflects confidence in the long-term strategy yet the CEO just sold a half-million dollars worth of shares in May. In any case, the buy back will surely allow him to collect his $20 million salary for a few more years. Bloomberg data shows that insiders haven’t bought shares in the company in the open market since at least 2010. Last year there were 39 open market transactions in the stock, all sellers and totaling about 1.4 million shares or about $100 million in stock.
So the company raises cheap money, buys back shares and the insiders sell. Who lends money to a company like that at such cheap rates?
