John Deere Capital Corp, a unit of Deere & Company ((DE - Analyst Report)), sold $850 million of medium term notes in two parts.
The five year fixed rate notes worth $500 million, are at a risk premium of 65 basis points over Treasury bonds and the $350 million two year floating-rate notes are 15 basis points over the three-month London Interbank Offered rate. Deutsche Bank AG ((DB - Analyst Report)), HSBC () and JPMorgan Chase & Co. ((JPM - Analyst Report)) are the joint bookrunning managers for the sale.
As of April 30, 2011, Deere had cash and cash equivalents of $3.95 billion, up from $3.44 billion as of January 31, 2011 and $3.61 billion as of April 30, 2010. Long-term borrowings declined to $16.2 billion from $16.7 billion as of January 31, 2011 and from $17.4 billion as of April 30, 2010.
Deere seeks to grow its competitive position in the agricultural equipment business as well as in the construction and forestry segment in the emerging and high potential markets such as Brazil, China, India and Russia. Deere’s consistent investment in new products and expanded global capacity help create a solid footing for the future.
Given the increased global demand for food, shelter and infrastructure, we believe the long-term outlook for Deere remains strong. However, in the near term, margins are expected to be constrained due to elevated raw material costs and increased R&D costs associated with rigorous global emissions standards. The company currently retains a Zacks #3 Rank (short-term Hold recommendation).
Illinois-based Deere & Co. is engaged in the production and distribution of agricultural and forestry equipment, construction equipment and engines worldwide. The company sells products in the U.S. and Canada through branch offices as well as through distributors and dealers for the resale of products internationally. Deere also competes with CNH Global NV () and Kubota Corporation ().