Oracle Sells $14 Billion in Bonds as Investment Grade Weathers Brexit

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.

Split among five tranches, the offering from the Redwood City, Calif., maker of business software 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. It comes a day after Molson Coors Brewing Co. broke an unusual four-day drought of new issuance by selling $5.3 billion of new bonds.

Although bankers were hesitant to test investors immediately before or after the Brexit vote, the sales show the resilience of demand for high-quality bonds, which offer investors a relatively safe place to put their money while offering a little more yield than U.S. government bonds.

Pulled down by falling Treasury yields, 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 the benchmark 10-year Treasury note fell to 1.463% from 1.741%.

Bond yields fall when their prices rise.

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.

Express Scripts Holding Co. and General Motors Financial Company Inc., a subsidiary of General Motors Co., were also poised to price substantial bond deals Wednesday. Express Scripts is selling $4 billion of new bonds, while General Motors is issuing $2 billion of bonds, according to LCD, a unit of S&P Global Market Intelligence.

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.

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 [e-mail]

(END) Dow Jones Newswires

June 29, 2016 16:35 ET (20:35 GMT)

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