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

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 [e-mail]

(END) Dow Jones Newswires

June 29, 2016 18:40 ET (22:40 GMT)

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