Company Issues Bonds Even Though It Doesn't Need Money

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Interest rates are so low, even for corporate bonds, that United Rentals is issuing debt without any apparent need for the money.

Really, they just need to earn return above their cost of financing for it to be a good deal.

The company clearly believes that rates won’t stay this low forever. Which makes issuing 10-year bonds right now a steal.

WSJ: “The capital markets have opened up and issuers have raced to it because you never know how long the window will remain open,” said Jason Mudrick, of Mudrick Capital Management in New York. The U.K. satellite communications company Inmarsat Plc, the American retailer Toys “R” Us Inc. and the Polish broadcaster TVN SA were among the low-rated issuers lining up to sell risky junk bonds this week as cash-rich portfolio managers gladly opened their wallets in pursuit of higher returns.

Equipment rental company United Rentals Inc. seized the opportunity to stockpile cash by selling $500 million in 10-year bonds earlier this week.

“We didn’t have an immediate near-term financing need, but we saw this as an opportunity,” company treasurer Irene Moshouris said. “The market was more open and liquid than it has been in previous months.”

Read more here.

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