Eating Up the AAA

Johnson & Johnson is full of surprises these days. Last week, it sued the Red Cross over its use of the red cross. Yesterday, it raised $2.6 billion in what was its largest debt offering ever.

In a market where investors are snubbing corporate bond offerings from the junk-rated all the way up to investment grade, Johnson & Johnson actually increased its offering by $1.1 billion at the 11th hour. The reason? Investor demand.

Apparently, investors are still willing to take on the risk for the least risky investments. Indeed, Moody's awarded the debt an AAA rating, which is the cleanest bill of corporate financial health possible. According to Bloomberg, there are only eight U.S. companies with triple A credit ratings.

Johnson & Johnson waited four years for this nearly insatiable demand. The last time it sold debt was in 2003, when it issued 30-year notes at 4.95 percent yield. Today's offering included 30-year debt at 5.95 percent.

Institutional investors have shunned the corporate debt market as the fallout from subprime mortgage has spread. According to Dealogic, which tracks bond information, corporate bond issuance fell by 77 percent in July from the prior month. Dozens of leveraged buyout deals have been shelved in recent weeks because of unfavorable reception in the debt markets.

Johnson & Johnson plans to use the proceeds to repurchase stock, pay down debt, and capital spending.

That's a list of items that plenty of other corporations would love to be able to cross off their 'to-do' lists too, if only they could.