A number of high-yield technology companies are considering issuing bonds to take advantage of a red-hot market that could provide them with cheap financing, according to officials at two separate underwriting firms who have spoken with the companies. The combination of a run-up in the secondary market for these companies' bonds, and a depressed equity environment makes issuing new paper particularly attractive, says Joe Garofoli, managing director at KBC Financial Products, a secondary-market dealer that specializes in trading technology credits. Garofoli says he has no direct knowledge of any planned offerings.
Though the sell-siders decline to name the companies with which they are having discussions, buy-siders speculate that Solectron Corp is the most likely of a handful of candidates. Solectron announced last Monday that it would pay cash to take out $522 million in zero coupon convertible notes due in 2020. Though the company has $2 billion in cash, it also has a $1.2 billion issue that can be put by investors in May of 2004, and could use an extra cushion, according to one buy-sider. Goldman Sachs is said to have a strong relationship with the company, but Goldman officials did not return calls, nor did Kiran Patel, Solectron's cfo.
Other technology companies seen as among the more likely near-term high-yield issuers are Fairchild Semiconductor, Xerox Corp. and Flextronics International. David Henry v.p. finance at Fairchild, did not return a call. Navin Chheda, senior manager of capital markets at Xerox, and Thomas Smach v.p. finance at Flextronics, declined comment.
