Rating: Aaa/AAA Amount: $6bn global bond
Maturity: July 9, 2007
Issue price: 100.00
Coupon: one month Libor plus 3bp until July 2003; one month Libor plus 8bp until July 2004; one month Libor plus 10bp until July 2006; one month Libor plus 12.5bp thereafter
Put option: at par each year from July 2003
Launched: Tuesday June 11
Joint books: Merrill Lynch, Morgan Stanley
Bookrunner's comment:
Morgan Stanley - This deal was extremely successful. This structure has been around for almost three years, but this is the first time GECC has used it. Obviously having paid down their commercial paper issuance there is much less GECC short term paper in the market than there was at the beginning of the year and those same money market funds that bought this deal are those which have had much less GECC CP to buy this year.
This is a longer security than CP, which goes out to nine months.
This deal has a five year final maturity but because of the monthly extension option and an initial maturity of 13 months, money market managers could buy it. Money market funds can only buy paper with 397 day maturities and under.
The security is designed so that the coupon steps up every time investors are given the option to extend. The coupon for the first 13 months is 3bp over Libor. Then investors have an option to extend into the second year for another 12 months at 8bp over Libor, into the third at 10bp over Libor, the fourth year at 10bp over Libor and the fifth year at 12.5bp over Libor.
The deal is attractive to investors because it gives them a couple of basis points pick-up over where GECC 18 month and two year paper trades, which is around Libor flat. One month GECC CP trades around Libor minus 8bp.