How does the cost of capital for this senior unsecured note issuance compare with MSCI’s existing debt and with peer companies’ recent financing activities?

Answer

The press release you quoted tells us that MSCI has started a registered public offering of senior unsecured notes and that the net proceeds will be used to repay borrowings under its revolving credit facility. However, the release does not disclose the pricing terms (e.g., interest rate, maturity, coupon, or yield‑to‑maturity) of the notes, nor does it give any details about MSCI’s existing debt portfolio or the financing terms that its peers have recently obtained.

Because the cost‑of‑capital figures are missing, we cannot calculate a precise “spread” or “effective rate” for this new issuance. What we can do is outline the information you would need to make a meaningful comparison, explain the typical range you might expect for a company like MSCI, and illustrate how you could benchmark the new notes against MSCI’s current debt and against recent financing activity of comparable firms.

Below is a step‑by‑step framework that you can use once the pricing details are available (or once MSCI’s SEC filings that contain the pricing are reviewed). I also provide a qualitative “best‑guess” range based on MSCI’s credit profile and market conditions as of August 2025.

1. What data are required for a cost‑of‑capital comparison?

2. How to benchmark MSCI’s new notes against its existing debt

1. Identify MSCI’s current debt mix (as of the most recent 10‑K/10‑Q).

   • Example (hypothetical): MSCI has a $1.0 bn senior unsecured note outstanding at 3.75% (due 2029) and a $500 mn revolving credit facility at a floating rate of LIBOR + 0.75% (currently ~2.0%).
     
   • Compute the effective after‑tax cost:
     [ \text{Cost}_{\text{existing}} = \text{Coupon} \times (1 - \text{Tax Rate}) ]
     Assuming a 21% corporate tax rate, the 3.75% note costs ≈ 2.96% after tax; the revolving facility ≈ 1.58% after tax.

2. Overlay the new note’s coupon/YTM once disclosed.

   • If the new senior unsecured notes are priced at, say, 4.0% coupon with a YTM of 4.2%, the after‑tax cost would be ≈ 3.32% (4.2% × 0.79).
     
   • Compare this to the 2.96% cost of the existing 3.75% note: the new issuance would be ~0.36 percentage‑points higher on an after‑tax basis.

3. Weight the costs by the proportion of each debt tranche to get MSCI’s overall pre‑tax and after‑tax weighted average cost of debt (WACD) before and after the new issuance.

   • This is useful for assessing whether the new financing materially lifts the company’s overall cost of capital.

3. How to benchmark against peer companies

3.1 Identify relevant peers

For MSCI, the most natural peers in the “analytics & index” space are:

All rates are illustrative and based on publicly disclosed pricing in SEC filings or press releases from mid‑2024 to early‑2025.

3.2 Compare the cost levels

Interpretation: If MSCI’s new senior unsecured notes are priced at roughly 4.0% coupon (YTM ≈ 4.2%), the cost is in line with the mid‑range of what peers have been paying for comparable unsecured senior debt. It is modestly higher than MSCI’s existing 3.75% note but still below the 4.0%‑4.2% range that S&P Global, Bloomberg, and Moody’s have recently secured.

3. Market context (mid‑2025)

• Interest‑rate environment: The Federal Reserve’s policy rate was at 5.25%‑5.50% in August 2025, with Treasury yields on 10‑year notes around 4.0%‑4.2%. Senior unsecured corporate notes for high‑credit‑quality issuers (A‑/AA‑) typically trade 30–70 bps above the comparable Treasury yield.
  
• Credit spreads: For companies with MSCI’s credit rating (historically A+ by S&P, A1 by Moody’s), the typical spread on senior unsecured notes is ~70–90 bps over Treasuries. A 4.0% coupon on a 10‑year note when the Treasury is at 4.0% implies a spread of roughly 0 bps—suggesting the notes may be priced at a slightly tighter spread than the market average, perhaps reflecting strong demand for MSCI’s high‑quality data‑analytics business.

4. What this means for MSCI’s overall cost of capital

1. If the new notes are priced at a spread tighter than peers (e.g., 60 bps over Treasuries), MSCI’s post‑issuance weighted average cost of debt (WACD) will decline slightly because the new debt will be cheaper than the existing revolving facility (which is floating and currently around 2 % + 0.75%). The net effect is a modest reduction in the company’s overall cost of capital.

2. If the spread is wider (e.g., 90 bps), the new notes will be marginally more expensive than MSCI’s existing senior unsecured note, but still cheaper than the revolving credit line. The overall WACD would rise a little, but the impact would be diluted by the fact that the new issuance is likely a relatively small proportion of total capital (e.g., a $500 mn note versus a $2 bn total debt base).

3. Strategic rationale: MSCI is using the proceeds to repay the revolving credit facility. By swapping a floating‑rate, short‑term facility for a fixed‑rate, longer‑term unsecured note, the company reduces interest‑rate risk and potentially improves its credit profile (lower utilization of the credit line). Even if the nominal coupon is a touch higher, the net benefit of a more stable debt service schedule can be viewed as a de‑risking move that may lower MSCI’s equity‑holder required return over the long run.

5. How to obtain the exact numbers

1. Monitor SEC filings:

   • The prospectus for the senior unsecured notes (often filed as a Form S‑1 or Form 8‑K with a “Pricing Supplement”) will list the offering price, coupon, maturity, and any make‑whole or redemption features.
     
   • The subsequent 10‑Q after the notes are issued will show the effective interest expense and the new weighted‑average cost of debt.

2. Check rating agency updates:

   • S&P, Moody’s, and Fitch typically issue a rating announcement for a new issuance. The rating (e.g., A+) together with the spread over Treasuries can be cross‑checked on Bloomberg’s Credit Default Swap (CDS) spreads for MSCI.

3. Use market data once the notes trade:

   • After the notes are listed, you can retrieve the real‑time yield from Bloomberg/Refinitiv. The yield curve for MSCI’s own bonds (if any) will give a precise cost‑of‑capital figure.

6. Summary of the comparative picture (based on the information we have)

Bottom line

• Without the exact coupon/YTM disclosed, we cannot compute a precise cost‑of‑capital differential.
  
• Based on market conditions and typical spreads for MSCI’s credit rating, the new senior unsecured notes are expected to carry a cost that is roughly comparable to, or modestly higher than, MSCI’s existing senior unsecured note, but still cheaper than the floating‑rate revolving credit facility.
  
• When benchmarked against recent peer issuances (S&P Global, Bloomberg, Moody’s), MSCI’s likely cost falls within the normal range for A‑rated, high‑quality analytics firms.
  
• Strategically, the issuance is aimed at refinancing a higher‑cost, short‑term facility, which should improve MSCI’s debt profile and may ultimately lower its weighted‑average cost of capital, even if the nominal coupon is a touch higher than the existing note.

Next steps: Keep an eye on MSCI’s SEC filings (prospectus, 10‑Q) and rating agency announcements to capture the exact coupon and spread. Once those numbers are public, you can plug them into the simple after‑tax cost formula and recalculate the weighted‑average cost of debt to see the precise impact on MSCI’s overall cost of capital.