Comcast Bond Issuance

Comcast Bond Issuance

Summary

On Feb 19th 2014, The Wall Street Journal published an article on Comcast’s bond issuance of 10-year and 30-year corporate bonds. The 10-year bonds had a coupon rate of 3.6% and the 30-year bond had a coupon rate of 4.75%. Both the bonds were sold at a discount, yielding 3.669% for the 10-year, and 4.806% for the 30-year bond.

Comcast was able to raise a total of $2.2 billion through the issuance of these bonds – with $1.2 billion raised from the 10-year bond and $1 billion from the 30-year bond. The proceeds of these bond sales are expected to be used for servicing existing long and short terms debts due in the next few months.

The spread for these bonds on comparable US Treasuries was 93 basis points for the 10-year bond and 110 basis points for the 30-year bond.

Analysis and Discussion

I chose this article since we studied Bonds in detail in Chapter 3 of Brealey, Myers and Allen. There were several aspects of this article that would have made little sense to me prior to starting this Finance course. Terms such as yield to maturity, spread to US treasuries, 10-year bonds and 30-years bonds jumped at me while reading the article as we’d recently covered these in class and I’d come across these terms during homework and exams.

According to the article, Comcast raised $2.2 billion through bonds of two different maturities, 10-years and 30-years. There are 3 major ways for a corporation to raise cash – bank loan, issuing bonds, and issuing stocks. The first two methods are debts that a company pays back over a term, with interest. The interest on a bond is paid in the form of coupon payments – which are simply a percentage of the bond’s face value at regular intervals - most commonly semi-annual - until the maturity of the bond. The coupon payment on Comcast’s 10-year bond is 3.6% and on the 30-year bond is 4.75%. But this alone does not determine the ‘real’ interest rate on a bond. (The coupon rates were not clear...