EMC Bondholders Down More Than Half a Billion Amid Dell Deal

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Dell logos are seen at its headquarters in Cyberjaya, outside Kuala Lumpur September 4, 2013. REUTERS/Bazuki Muhammad

Dell logos are seen at its headquarters in Cyberjaya, outside Kuala Lumpur September 4, 2013. REUTERS/Bazuki Muhammad

By Michelle Davis

Dell Inc.’s $67 billion buyout of EMC Corp. is shaping up to be a win for nearly everyone involved — except for the data storage company’s bondholders.

Investors in EMC’s $5.5 billion of bonds are down about $562.6 million since news of the deal first became public last week.

They’re selling off because of concerns that Dell’s plan to raise about $50 billion in debt for the acquisition will push existing bondholders down the capital structure, putting more creditors ahead of them to be repaid in the event the company runs into trouble. The EMC notes lack protections that would have allowed bondholders to demand early repayment in the event of an ownership change.

 “From the perspective of EMC bondholders, we’d like to see the deal not happen,” saidJoe Mayo, head of credit research at Conning, a global insurance investment manager that owns EMC bonds. “They’re going to end up at the bottom of the pile when all is said and done.”

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