Teva Finalizes Bond Sale
July 18 2016 - 2:10PM
Dow Jones News
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 sam.goldfarb@wsj.com
(END) Dow Jones Newswires
July 18, 2016 13:55 ET (17:55 GMT)
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