AbbVie Sells $30 Billion of Bonds -- 2nd Update

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 [e-mail]

(END) Dow Jones Newswires

November 12, 2019 18:24 ET (23:24 GMT)

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