Companies Issuing Debt to Fund Special Dividends

Companies that report in US dollars, such as cruise operator Carnival, have recently been rushing to issue debt to fund special dividends ahead of tax hikes

Dave Sekera, CFA 4 December, 2012 | 2:15PM Joscelyn MacKay

During November, corporate credit spreads in the US gave back some of the gains they made since early summer as the average spread in the Morningstar Corporate Bond Index widened out 11 basis points to +147.

The financial sector continued to outperform; it only widened out 6 basis points compared with the industrial sector, which widened 16 basis points, and the utilities sector, which widened out 18 basis points.

Credit spreads in Europe, however, tightened 5 basis points over the month to +145. As seen in the chart below, this is the first time since June 2011 that the average credit spread in our European Corporate Bond Index was tighter than that of the US Corporate Bond Index.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

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About Author

Dave Sekera, CFA  is a senior securities analyst with Morningstar.

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