Dell to float bonds to raise fund for future buys

BANGALORE, INDIA: PC maker Dell, which lost the recent 3PAR bid to HP, has said it will float bonds to raise money potentially for new acquisitions.

In a filing with the Securities and Exchange Commission on Tuesday, Dell said it will offer bonds in three parts. Though the prospectus did not give detail of the amount to be raised, citing a Bloomberg report, analysts said that the amount is about $1.5 billion.

According to Bloomberg, the company issued $500 million of 1.4 percent, three-year notes that yield 70 basis points more than similar-maturity Treasuries, $700 million of 2.3 percent, five-year debt that pays a 90 basis-point spread and $300 million of 5.4 percent, 30-year bonds at a spread of 175 basis points, or 1.75 percentage points.

Dell had originally offered $1.15 billion to 3PAR, but eventually HP won the bidding war as it had stronger balance sheet and cash reserves. Learning a lesson from that experience, Dell does not want to lose another bidding war.

In the regulatory filing, Dell said that it has $3.3 billion in debt.

“As part of our overall growth strategy, we have completed strategic acquisitions to augment select areas of our business with more products, services, and technology. Our recent acquisition of Kace Networks, Inc, Scalent Systems Inc., and Ocarina Networks Inc., and our continued integration of Perot Systems Corporation, have enabled us to expand our services business and better position our company for immediate and long-term growth through the sale of additional enterprise solutions,” the statement said.

Dell, which has had several debt offerings since 2006, said the interest rate environment was good for an offering. The rates on the offering ranged from 1.4 per cent on the three-year notes to 5.4 percent on the bonds.