Latest To Sell FDIC-Backed Debt: Deere


Everyone’s going gaga for the FDIC-backed debt scheme, so why shouldn’t a maker of farm equipment get in on the game. Deere is raising up to $2 billion through the program, saving it tens of millions compared to what it would have to pay without the FDIC’s backing AKA the free market rate.

Like many other equipment makers, Deere does have a lending operation:

“We are an eligible U.S. savings-and-loan holding company and, therefore an eligible entity and a participant under the TLG program by virtue of not electing to opt out of the TLG program,” Deere said in its bond prospectus.

So what’s the point of this FDIC program? We thought it was about keeping the credit markets open and mitigated systemic economic risk. But in the case of Deere, whose debt is trading at a yield of 5%, it looks like the market is working just fine. So basically it’s a program to put the taxpayer on the hook so that any company can shave down their cost of capital.

Given how many companies have lending operations to compliment their core businesses, we wouldn’t be surprised to see a wave of industrials become S&Ls in order to take part in the program.