AbbVie Sells $30 Billion of Bonds -- 2nd Update
November 12 2019 - 6:39PM
Dow Jones News
By Sam Goldfarb
AbbVie Inc. sold $30 billion of bonds Tuesday to help fund its
acquisition of Allergan PLC, taking advantage of investors' strong
demand for higher-quality business debt to bring one of the largest
corporate-bond sales on record.
Like other investment-grade companies that have completed large
bond sales in recent years, AbbVie had little trouble selling its
debt. After holding calls with investors last week, the drugmaker
issued 10 different bonds with maturities ranging from 1 1/2 years
to 30 years.
The deal marked the fourth-largest investment-grade bond sale on
record, exceeding Comcast Corp.'s $27 billion sale in October of
last year, according to Dealogic.
For AbbVie, buying Allergan would give it a dominant position in
the $8 billion-plus market for beauty drugs, such as Botox, as it
attempts to diversify beyond Humira, its top-selling
rheumatoid-arthritis drug.
After the acquisition, the company's ratio of net debt to
earnings before interest, taxes, depreciation and amortization is
expected to almost double to 3.4 times, according to the research
firm CreditSights. The company, though, is hoping to bring that
ratio down to 2.5 times by the end of 2021 by using free cash flow
to pay down around $15 billion to $18 billion of debt.
In their first offer to investors Tuesday, banks proposed a
yield on AbbVie's new 10-year notes that would be 1.5 percentage
points above the comparable U.S. Treasury yield, investors said.
That was later lowered to 1.35 percentage points and ultimately
finalized at 1.30 percentage points, translating to an initial
yield of 3.203%.
By comparison, the company's existing bonds due in 2028 had
traded heading into the sale at a 1.27 percentage-point spread to
Treasurys, according to CreditSights.
The yield on the benchmark 10-year U.S. Treasury note settled at
1.909%, compared with 1.930% Friday. The bond market was closed
Monday for Veterans Day.
Even with a recent increase in Treasury yields, there remains a
favorable borrowing environment for most companies. The average
U.S. investment-grade corporate-bond yield was 3.0% Friday, up from
around 2.8% in early October but still down from 4% in January,
according to Bloomberg Barclays data.
So far this year, companies have sold around $1.25 trillion of
investment-grade corporate bonds in the U.S. market, according to
Dealogic. That is a little more than were sold at this point last
year, though off the record-setting pace from two years ago.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
(END) Dow Jones Newswires
November 12, 2019 18:24 ET (23:24 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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