Tombstone Case

5411 words 22 pages
For the exclusive use of D. Wang, 2015.

9 -2 1 1 -0 6 3
REV: SEPTEMBER 27, 2012

TIMOTHY A. LUEHRMAN
DAVID LANE

Tombstones
Capital markets offer corporations varied ways to raise funds. This Note presents summary information for a selection of corporate securities issued during 2009-2010 following the financial crisis of 2008–2009. They include three issues of senior unsecured notes, one floating rate note, one common stock offering, and one convertible note. The issuers are Microsoft, Coca-Cola Enterprises,
Norfolk Southern, IBM, Ford Motor, and Cephalon. Selected supplementary data on the issuers are summarized in Exhibit 1. A short glossary of terms appears at the end of the Note.
All three senior unsecured note issues
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Proceeds were used for general corporate purposes. 4 Market observers estimated that Norfolk Southern was paying about 0.75% more on its century bond than it would have had to pay on an otherwise similar 30-year bond.5

IBM Floating Rate Notes
On December 13, 2010, International Business Machines Corporation sold $1 billion in floating rate notes, with quarterly interest payments equal to 3-month LIBOR plus 0.03%, reset quarterly (see
Exhibit 6). On December 13, U.S. dollar 3-month LIBOR was 0.302%. Exhibit 7 shows historical rates for U.S. dollar 3-month LIBOR. IBM’s disclosures indicated that issue proceeds would be used for general corporate purposes. Only a few months earlier, in August 2010, IBM had issued $1.5 billion of
3-year notes with a fixed coupon of 1.0%. At the time, the 1.0% coupon was the lowest on record for a
U.S. corporate bond issue.

Ford Common Stock Offering
On May 12, 2009, Ford Motor Company announced that it would raise up to $2 billion by selling common stock to the public (see Exhibit 8). The cash raised would be used primarily to fund in cash rather than in stock certain payments the company was required to make to a union-controlled
Voluntary Employee Beneficiary Association (VEBA) retiree healthcare trust. The VEBA

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