The bonds, expected to be priced later on Monday, are a reopening of a $300 million 100-year issue Norfolk Southern sold in 2005, according to IFR, a Thomson Reuters Service.
The decision to sell the debt was "based on the current low interest rates and the strong appetite among buyers for 100-year bonds," said Norfolk Southern spokesman Robin Chapman.
Norfolk Southern is the latest in a stream of companies taking advantage of low borrowing costs as falling Treasury yields push rates lower on all types of bonds.
Average corporate bond yields last week dipped to 3.775 percent, nearly matching a record low of 3.759 percent hit in June 2003, according to Bank of AmericaMerrill Lynch data.
Century bonds are rare and have fallen in and out of favor over the years. Walt Disney Co International Business Machines Corp and J.C. Penney Co sold 100-year bonds in the 1990s, while bond insurer Ambac Financial Group sold 100-year debt in 2003.
Long-maturity bonds are typically sold by companies with household names or a long history of solid earnings.
Norfolk Southern, which dates to the start of Southern Railway in 1830, is already 180 years old.
Traders said the Norfolk Southern bonds may find demand from insurance companies which need to match their long-duration liabilities with a long-term income stream.
The bonds are expected to yield about 230 basis points over Treasuries, which would be about 90 basis points more than Norfolk Southern's seasoned 30-year debt, one trader said.
Though long-maturity bonds are at greater risk of falling in price when interest rates rise, 100-year bonds are not much more sensitive to rate changes than 30-year bonds, the trader said.
Goldman Sachs is bookrunning manager for Norfolk Southern's new issue, which will be a minimum of $100 million in size, IFR said. The original issue was priced at par in March 2005 with a 6 percent coupon. (Reuters)
