The fintech, which is having a stupendous second quarter, raised the amount quite cheaply.

PayPal Holdings Inc. (NASDAQ: PYPL) on Monday raised $1 billion in corporate bonds priced at 160 bps over Treasuries and yielding 2.3%. (Benzinga) According to MarketWatch, the pricing is even less than what PayPal charges U.S. merchants for sales on its platform.

PayPal also raised another $1 billion each in 3-year bonds with pricing aimed at a yield of $1.35%, 5-year bonds with a yield of $1.65%, and 30-year bonds with a yield of 3.25%.

The pricing is a reflection of the strength of the company’s business model and its credit standing. It is significant that it was achieved amidst the virus crisis.

Surging business at PayPal

The Paypal stock touched a new high last week after the company’s earnings call. The company revealed that it set records for the number of transactions, new accounts, and growth in April and thereafter.

“I believe we will look back at this time as a tipping point, where digital payments both offline and online became an essential element of our lives, hastening the demise of cash, enforcing a reimagination of commerce, retailing and the payment system,” said President and CEO Dan Schuman on the earnings call.

Analysts too have sounded off very optimistically on the paradigm change in the company’s business after online transactions boomed during COVID-19. Lockdowns and shelter-in-place restrictions led to a surge in online commerce and digital payments.

“The market increasingly looks to PYPL as one of the clear secular winners on the other side of the current crisis with the anticipation of higher earnings power warranting higher valuations,” Wells Fargo analysts said.

Further, PayPal has distributed more than $1 billion in small-business aid under the Trump administration’s stimulus program. Stimulus checks to households are also being paid out by the company.

Utilization of the funding

As of March 31, 2020, $3.0 billion was outstanding under the company’s Revolving Credit Facility. It incurred a weighted average interest rate of 2.19%.

The company intends to use a portion of the net proceeds from the offering to repay these outstanding borrowings under this facility. It will use the remainder for general corporate purposes.

According to MarketWatch, S&P said the new debt raise is largely “leverage neutral” for PayPal, which is “showing a much lower impact from COVID-19 than its peers.”

Related Story:  FinTech: April Was PayPal’s Strongest Month Since its IPO; “We will Hasten the Demise of Cash”