Last week, American Express Co.’s (AXP) (AmEx) expanded the sale of its long-term notes from C$400 million to C$600 million, according to Bloomberg. Bank of America Merill Lynch of Bank of America Corp. (BAC) has been appointed to manage the extended note issue.
The notes are one of the two tranches of the notes issued on June 1, 2011. AmEx had then vended off long-term notes worth C$725 million in two tranches. The first set of notes was worth C$400 million that are now increased to C$600 million. These notes mature in 5 years, due date being June 3, 2016.
The newly extended notes are issued at a price of C$100.574, the coupon rate being fixed at 3.6%. This will yield 3.465% with a spread of 200.1 basis points (bps). The settlement of these notes is now scheduled for October 4, 2011.
Previously, this set of notes was issued at C$99.973, while settlement was due on June 6, 2011. Meanwhile, the second tranche of floating-rate notes were worth C$325 million maturing in 3 years, due date being June 6, 2014. Issued at a price of C$100.00, the settlement of these notes was on June 6, 2011.
These notes issue were followed by another note sale that was executed towards the end of June this year. AmEx’s American Express Credit Corp had vended off senior unsecured floating-rate notes worth $600 million.
Accordingly, the senior floating-rate notes were issued at a price of $100.00 and dated to mature on June 24, 2014. The non-callable notes are projected to have a coupon rate of 85 bps over the existing 3-month LIBOR rate. Interest on the notes is payable quarterly, in equal instalments, commencing September 24, 2011. Besides, the settlement was done on June 24, 2011.
The senior floating-rate notes carry a rating of “A2” from Moody’s Investor Service of Moody’s Corp. (MCO), “BBB+” from Standards & Poor’s and “A+” from Fitch. Further, AmEx appointedBank of America Merill Lynch and UBS Securities LLC of UBS AG (UBS) the joint book-running manager for the sale.
Our Take
In May this year, Moody’s also raised its ratings outlook onAmEx and its subsidiaries to ‘stable’ from ‘negative’. The rating agency also affirmed its status “A3” rating on AmEx’s long-term debt, placing it at an upper-medium level of the investment grade.
AmEx has pulled itself out of the recession more swiftly than its rivals, owing to its creditworthy customers. Moreover, less reliance on revolving credit and back-end fees along with fairly balanced debt maturities has helped gain competitive advantage while also improving its overall risk profile. Besides, there has been an impressive recovery in credit trends, with increased card spending and strong billings over the last few quarters.
