RE:RE:From todays Globe and Mail
bttmfischer wrote: I am not reassured by this move. On the surface it is akin to sombody getting a visa cash loan to pay the mastercard bill.
Any dissenters?
This is a pretty standard maneuver by any company this size that has the ability to write quality notes.
And usually getting that 'Visa cash loan to pay Mastercard' comes with a low interest rate for 6 months, currently I've been givin an offer of 2.99% on the balance transfer before it bumps up to the standard 18.5%, which is actually a pretty good deal for those needing this type of financing as otherwise they hold the debt in Mastercard and have to pay the 18.5%+ straight through... so I don't quite understand how you are trying to spin this analogy into a possible somewhat negative.
It's standard they pay down other higher interest debts and open up room on other lending facilities (in the current situation its an unsecured facility) in which they can pull quickly from in the event an opportunity or unforeseen need arises with these types of moves and it's debt that's put aside for 3 years on a fixed rate. The unsecured revolving credit facility is likely a prime+ account and most banks prime is 6.95% altho they likely get a better corporate rate more tied to Canada's Central Bank prime at 4.75%, even if they go with Central Bank Prime+1 they are getting a better deal from the notes than the other lending facility.
It should also be noted that it's starting to make rounds that assumptions are the central bank likely moves to 5% at some point, on an unsecured facility the interest rate will bump up as that happens, but the notes are on a secured rate, so they will not increase should the central bank make anouther move.
If you do not see this move as a positive, than you do not understand what you are trying to discuss.
The only somewhat negative I see is that BCE, CNR and ALA have written better rated notes recently (for the company) but before the latest rate hike, and I've also seen other company that have had to offer at higher 6+% rates earlier in the year...