Oracle Has $14 Billion Bond Sale -- WSJ
June 30 2016 - 3:03AM
Dow Jones News
By Sam Goldfarb
Oracle Corp. sold $14 billion of bonds Wednesday, underscoring
the strength of the investment-grade corporate bond market in the
aftermath of the U.K.'s vote to leave the European Union last
week.
In addition, Molson Coors Brewing Co. became the first company
to issue euro-denominated bonds since the vote by pricing an EUR800
million ($890 million) bond to help fund its purchase of SABMiller
PLC's stake in the MillerCoors LLC U.S. joint venture.
The sales show the resilience of demand for high-quality
corporate bonds, which offer investors a relatively safe place to
put their money while providing a little more yield than U.S.
government bonds.
The average yield of investment-grade corporate bonds was 2.9%
at the end of Tuesday, down from 3.03% last Thursday before the
Brexit vote was tallied, according to Barclays PLC data. Over the
same period, the yield on the benchmark 10-year Treasury note fell
to 1.463% from 1.741%.
Bond yields fall when their prices rise.
Molson Coors had broken an unusual four-day drought of new
issuance by selling $5.3 billion of new dollar-denominated bonds on
Tuesday.
Oracle's offering, split among five tranches, is the
third-largest bond deal of the year, behind Anheuser-Busch InBev
NV's $46 billion issuance in January and Dell Inc.'s $20 billion
placement last month.
Dan Mead, head of the U.S. investment grade syndicate desk at
Bank of America Corp, a lead underwriter of the Oracle and Molson
Coors bond deals, said he was "pleasantly surprised by how quickly
the markets have reopened here for investment grade," noting that
it was only Monday that financial markets were in considerable flux
over Brexit.
Oracle's bond offering included a $3 billion, 10-year note
priced to yield 1.2 percentage points above Treasurys. Proceeds
from the offering are earmarked for general corporate purposes,
which could include share repurchases and future acquisitions,
according to SEC filings.
Elsewhere in the market Wednesday, Express Scripts Holding Co.
sold $4 billion of new bonds, while General Motors Financial
Company Inc., a subsidiary of General Motors Co., priced $2 billion
of bonds.
The new-issue market for junk-rated corporate bonds, on the
other hand, has yet to pick up since the Brexit vote. That
lower-rated debt is suffering from reduced demand for riskier
assets amid uncertainty over the global economy, investors and
analysts said.
No corporate junk bond has priced since June 20, when the
propane gas distributor AmeriGas Partners LP issued $1.35 billion
of new bonds, according to LCD, a unit of S&P Global Market
Intelligence.
The average yield of U.S. junk-rated bonds was 7.5% Tuesday, up
from 7.09% last Thursday, according to Barclays.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
(END) Dow Jones Newswires
June 30, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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