Moody’s Issues Bonds Yielding Over 5%

interest rate swap

up-percentage-ssYou’ve probably heard of Moody’s Corporation because of its ratings on debt securities.  If that’s the type of company you think deserves exposure in your corporate bond portfolio, you might be interested to learn that Moody’s recently raised $750 million in the form of two new debt securities.

To see a list of high yielding CDs go here.

One of those securities, CUSIP 615369AE5, is a longer-dated senior unsecured bond maturing July 15, 2044 and paying semiannual interest at a fixed annual rate of 5.25%.  Moody’s does not rate its own bonds, but S&P has a BBB+ rating on Moody’s senior unsecured debt.  Despite my not considering the recent yield-to-worst of 5.107% immediately enticing, the coupon and the issuer make the notes worthy of a spot near the very top of my watch list.

The other recently-issued notes, CUSIP 615369AD7, are shorter in duration, maturing on July 15, 2019.  The 2019 maturing notes have a 2.75% coupon and pay interest semiannually.  Additionally, both series of notes have make whole calls.

For those less familiar with Moody’s, the following information may be of interest:

Moody’s Corporation is the parent company of Moody’s Investors Service (MIS) and Moody’s Analytics (MA).  MIS provides credit ratings and research covering specific debt instruments/securities, while MA offers broader advisory, software, and research services.  Through Q1 2014, Moody’s had trailing-twelve-month revenues of $3.0 billion, 69% of which came from MIS and 31% from MA.  The slide below, from Moody’s first quarter 2014 Investor Presentation, provides a bit more information on the company’s revenue breakdown:

Overview of Moody's


In terms of free cash flow, here are the numbers dating back to 2009:

2009: $553.1 million
2010: $574.3 million
2011: $735.6 million
2012: $778.1 million
2013: $884.5 million
2014: $900.0 million (estimate)

Finally, a debt-maturity schedule, excluding the recently issued 2019 and 2044 maturing notes, is included below:

Debt Maturities ex latest bonds

As part of your due diligence, remember to read the prospectus.  The pricing term sheet might also be of interest.  Moreover, keep in mind that if Treasury yields rise or corporate bond spreads widen in the near future, there’s a good chance one or both series of notes will experience mark-to-market price declines.

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