Teva Finalizes Bond Sale

Teva Pharmaceutical Industries Ltd. was set Monday to complete one of the largest bond deals of the year to help fund its purchase of Allergan PLC's generics business, becoming the latest company to take advantage of attractive financing conditions with a massive debt offering.

Despite an uptick in U.S. Treasury yields last week, the market for investment-grade corporate debt remains extremely favorable for companies, with fixed-income funds recording steady inflows and corporate bond yields near historic lows.

Israel-based Teva entered a cash-and-stock agreement to buy Allergan's generics unit in July 2015. The deal combines Teva, the world's largest generic-drug company by sales, with the third-largest competitor in the market. It included $33.75 billion in cash and Teva shares valued at $6.75 billion.

Widely anticipated by investors, the Teva bond offering is expected to proceed smoothly, in keeping with other recent bond deals from companies including Oracle Corp. and Walt Disney Co.

On June 29, Oracle issued $14 billion of bonds to fund general corporate purposes, including share repurchases. On July 7, Walt Disney locked in the lowest long-term borrowing costs of any U.S. company in history when it issued a 10-year bond with a 1.85% coupon and a 30-year bond with a 3% interest rate, according to LCD, a unit of S&P Global Market Intelligence.

Although early indications were that the Teva bond issuance would fall between $12 billion to $15 billion, the final size could be even larger than that owing to intense demand from investors, a person familiar with the matter said. After pricing the U.S. dollar-denominated deal, Teva is expected to raise several more billion dollars in the European debt markets.

If it can top Oracle's $14 billion offering, Teva's bond issuance would be the third largest of the year in the U.S. market, behind Anheuser-Busch InBev NV's $46 billion issuance in January and Dell Inc.'s $20 billion placement in May.

The bond deal is expected to be split between six tranches, with banks offering a 10-year note at around 1.65 percentage points above the comparable Treasury yield, according to a person familiar with the matter.

After recession fears faded earlier this year, investment-grade corporate debt has been in a sweet spot for many investors, offering higher yields than Treasurys without the risk of junk bonds or equities.

In the week ended July 13, investors poured $1.8 billion into investment-grade corporate bond funds, representing the 19th straight week of inflows, according to Bank of America Merrill Lynch Global Research.

On Friday, the average yield-to-maturity of investment-grade corporate bonds was 2.87% or 1.45 percentage points above comparable Treasury yields, according to Barclays PLC data.

The yield on the 10-year Treasury note was recently 1.597%, according to Tradeweb. That is down from 2.273% at the end of 2015, though up from its closing low of 1.366% set July 8 amid widespread economic anxiety stemming from the U.K.'s vote to leave the European Union.

Last week, Teva and Allergan said they had moved back the date at which either company could back out of their agreement, under certain circumstances, to Oct. 26 from July 26. When the deal was originally announced, the companies said they expected the deal to close in the first quarter of this year.

Write to Sam Goldfarb at [e-mail]

(END) Dow Jones Newswires

July 18, 2016 13:55 ET (17:55 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.