Tokyo based, expat Cape Bretoner. Learning to live in a de-leveraging world. Better suited to the crusades. CFA & FRM charter holder. Disclaimer: @Firehorsecaper reminds investors to always perform their own due diligence on any investment, and to consult their own financial adviser or representative when warranted. Any material provided is intended as general information only, and should not be considered or relied upon as a formal investment recommendation.
Joined Jun 23, 2015
89 Blog Posts


You don’t hear nearly as much about Dell anymore. Going private has that effect and that is what Michael Dell executed in 2013, along with partner Silver Lake who own approx. 25%.

Shaky debt markets argued for patience from the leads (BAML, BARC, C, CS, GS & JPM), but time was likely getting tight for Dell to raise the debt portion of the funding for their Oct. 2015 purchase of data storage firm EMC. Hybrid cloud, Dell is back baby.

In the end, the bond deal sold like hot cakes. Structured as a secured deal, with a 1st lien on certain company assets, the rating will be Baa3/BBB-, investment grade, just. On loss of investment grade, Dell agreed to spread “kickers” of 25bp per notch up to 200bp to allay investor concerns that the cloud they have hitched themselves to might be too Icarus like, in term of proximity to the sun.

At 20 yards this is a big deal, the 4th largest corporate bond ever (combined debt for Dell now just shy of $50bln) and the 2nd largest for 2015, overtaking Apple’s & Exxon’s $12bln deals to leave only AB InBev’s $46bln in #1 spot. The order booked topped out at $87bln for an upsized $20bln of bonds ($16bln initial size target, included an FRN which was subsequently dropped).

$3.75bln Dell (Baa3/BBB-) 3 year Fixed at US Teasuries (UST) +250bp, $4.5bln 5yr fixed @ UST +312.50, $3.75bln 7yr fixed @ UST +387.5, $4.5bln 10yr @ UST +425, $1.5bln 20yr @ UST +550, $2.0bln 30yr @ UST +575.

With the 30 year UST yielding 2.60% this makes the all-in yield on the longest and hence priciest tranche 8.35%, as long as the Baa3/BBB- rating are maintained.

Unsecured there were thought that Dell would have to pay 10-11% only a couple of short months ago, at the worst of it for credit spread, when BBB spreads were treble what they are today. Timing, check. Financial alchemy, indeed. Far out.

The structuring flexibility of being a private entity is likely to elicit some jealousy from certain gas & oil and pharma/biotech names. M&A for public entities is having a tough year with many pairing left at the altar or annulled . Going private is likely to become a much more popular avenue to creating shareholder value. As the stock of listed equity is reduced there is obviously less of it, all things being equal, causing priced to rise. The natural order of things, positive, normal, upward sloping. Gauge, and position, yourselves accordingly. JCG


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