Halister News

(Bloomberg) -- International Business Machines Corp. is selling its biggest euro bond sale since 2013 less than a fortnight after a double credit rating downgrade.

• Co. will price an EU2b two-part deal due in 8Y and 12Y, its largest same-day sale in the currency since raising EU2.5b in Oct. 2013, data compiled by Bloomberg show
• Moody’s and S&PGR both cut the co.’s rating by one notch at the start of this month on profitability and cash flow pressure concerns
  • Moody’s said in a May 3 report it is concerned IBM “will remain challenged for a longer than previously anticipated time to grow total revenue" and boost margins, as it cut its rating on the co. to A1
    • Also said IBM’s high investment level had negatively impacted profitability and cash flow
  • Two days later S&PGR lowered its rating on IBM to A+, citing operating declines as the co. continues to invest in transforming its business; also said the “transition to operating stability will take longer" than previously forecast
• IBM reported its 20th straight quarterly revenue decline in April as sales fell short of analysts’ estimates for the first time in a year
  • Follows years of investments in higher-growth areas and shifting the co. away from older products like computers and operating system software
  • Earlier this month billionaire Berkshire Hathaway Inc. chairman and chief executive Warren Buffett said he sold about a third of his investment in IBM as he doesn’t value the company “the same way that I did six years ago when I started buying”
• IBM will use proceeds from today’s deal for general corporate purposes; it also raised $2.75b in a four-part offering in the U.S. market in January
• NOTE: IBM has $3.9b of debt due this year, DDIS function shows
• Some information from person familiar with the matter, who is not authorized to speak publicly and asked not to be identified

To contact the reporter on this story: Leo Laikola in Helsinki at llaikola@bloomberg.net To contact the editors responsible for this story: Tom Freke at tfreke@bloomberg.net Hannah Benjamin