Magazine article American Banker

Reebok, Campbell Soup Borrow for Stock Buybacks

Magazine article American Banker

Reebok, Campbell Soup Borrow for Stock Buybacks

Article excerpt

Campbell Soup and Reebok International both recently turned to the hungry bank-loan market to outfit their capital needs for sizable stock buyback efforts.

Credit Suisse led a $1.39 billion loan for Reebok's repurchase and retirement of about one-third of its common stock.

J.P. Morgan & Co. and Chase Manhattan Corp. are leading a $2.5 billion loan for Campbell Soup to repurchase 18 million of its shares.

Some bankers said, despite the robust stock market, they anticipate other companies will also seek bank loans to institute large buyback programs.

"I expect this buyback trend to continue and in fact to accelerate," said Joseph V. Rizzi, a senior vice president and managing director in structured finance at ABN Amro North America.

ABN Amro acted as a co-agent in the Reebok transaction.

"This is an area we are targeting," he said.

Mr. Rizzi said the buybacks have hit the market in the late stages of a booming business cycle, as companies continue to generate cash but do not necessarily want to expand their businesses.

Some experts, particularly in areas like the banking industry, have said that sizable buybacks reflect management's inability to find additional sources of revenue. These companies, as a result, might have little immediate growth potential.

Reebok executives, however, said that the buyback reflects a low stock valuation.

"The situation with the valuation of Reebok's stock has been different than the general trend of the equity market over the past few years," said Leo Vannoni, Reebok's treasurer. …

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