Cola Wars in the Bond Market

New issues in U.S. corporate bond markets topped $36 billion last week, with multibillion-dollar issues accounting for much of the borrowing.

Leading the borrowing brigade was Freeport McMoRan Copper & Gold (NYSE: FCX  ) , with $6.5 billion spread over five-, seven-, 10-, and 30-year paper. The mining giant is using the money to fund its acquisitions of McMoRan Oil & Gas and Plains Exploration & Production.

Meanwhile, Coca-Cola (NYSE: KO  ) and Pepsi (NYSE: PEP  ) served up $2.5 billion each of new notes. Coca-Cola is using the money to redeem about $1.3 billion of higher-coupon paper. The debt service on the new notes will be about $40 million per year less than the old paper, and Coca-Cola should have more than a billion dollars left after redeeming the old paper. If the deal weren't already sweet enough, the new three-year, floating-rate note is pegged two basis points below LIBOR.

Pepsi didn't get quite as good a deal. Its three-year, floating-rate note bubbles up to 21 basis points above LIBOR, and the 10-year piece sports a 2.75% coupon versus 2.5% for Coca-Cola. Pepsi will be using the new money "for general corporate purposes, including the repayment of commercial paper."

UnitedHealth (NYSE: UNH  ) joined the multibillion borrowers club with prescriptions for 1.5-, six-, 10-, and 30-year notes totaling $2.25 billion. The "use of proceeds" section in the SEC filing listed general corporate purposes among the list of nearly every general corporate purpose conceivable.

Philip Morris International (NYSE: PM  ) just made multibillion borrowing by rolling out $1.85 billion over two-, 10-, and 30-year tranches. Whoever prepared the SEC filing must have done the same for UnitedHealth, as the list of uses for the money is nearly identical in the two filings.�

Companies continue to have access to low-rate borrowing in the bond markets. Of the companies profiled above, Freeport McMoRan, Coca-Cola, Pepsi, and Philip Morris International all issued 10-year paper with coupon rates below their respective dividend yields.

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