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#Written by David Tam, 1999.           #       
#davidkftam@netscape.net Copyright 1999#  
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From tamda@ecf.toronto.edu Mon Jul 12 18:32:27 1999
Date: Sat, 20 Mar 1999 01:40:43 -0500 (EST)
From: David Kar Fai Tam <tamda@ecf.toronto.edu>
To: APS 424S <aps424@chem-eng.toronto.edu>
Subject: #21-03/23/99-"AT&T plans massive bond offering"


The Globe and Mail, Thursday, March 18, 1999. B9.

   This article is about AT&T's strategy in financing its
business growth. It's an example of one of the many sources of
financing available to reputable corporations.  AT&T is preparing
to offer an extremely large amount of bonds to the market place,
worth more than $6 billion (US). This would make the offer the
largest corporate bond issue in US history.  Due to AT&T's recent
success, they are taking advantage of the hot demand for their
equities and debt instruments. There appears to be a lot of
interest and demand for the bonds and analysts predict that all
of it will be snatched up in a short amount of time.

   From a more financial analytical view, it appears that AT&T
plans to diversity their methods of financing. Rather than
issuing more shares and diluting ownership of the company for
existing shareholders, AT&T has chosen the alternate route.
Having examined their market credibility and the current interest
rates, which happens to be extremely low, AT&T has made the right
financial decision. The company should have no problems repaying
the loan in the future given the current success of the company
and its long-term outlook as predicted by market analysts. The
additional funds will be used to grow the business, leading to
more profit for the existing base of shareholders, giving them
the power of leveraging debt.

   AT&T is currently in the acquiring phase and has recently
acquired the U.S. cable giant TCI. The funds resulting from the
bonds will allow AT&T to purchase TCI with little depletion of
existing cash reserves.  While this may improve cash flow for the
company, they will have a higher debt to equity ratio. Despite
such a financial situation, it appears that willing buyers of the
new bonds believe the risks are acceptable. AT&T probably has
adequate real assets to secure the bond issue incase anything
goes wrong.

   For small start up businesses (such as our business plans),
bond issues are impossible. The only real major source of debt
financing is through the banks.  I would believe that many of us
aspiring entrepreneurs hope to someday be able to grow our
company to a point where bonds can be issued to an eager market.