By Mike Cherney
Medical-device manufacturer Medtronic Inc. is expected to sell
at least $10 billion of bonds Monday to help pay for its
acquisition of Ireland's Covidien PLC, making it one of the largest
bond deals of the year, according to investors familiar with the
deal.
Final prices and the size of the deal haven't been set, but the
maturities of the debt are expected to range from three to 30
years. A 10-year bond is being offered to yield about 1.55
percentage points more than benchmark U.S. Treasurys.
The Medtronic deal will add to the deluge of U.S. corporate bond
sales this year, with new bond sales on pace to best the total from
last year, which was the largest on record.
Medtronic, based in Minneapolis, has said it plans to redomicile
in Ireland once the merger is completed, an inversion deal aimed at
taking advantage of lower corporate-tax rates overseas. The company
previously indicated it was looking at taking on $16 billion in
debt to help pay for its $43 billion takeover of Covidien.
Medtronic initially planned to partially pay for the deal with
$13.5 billion in cash held by its foreign subsidiaries, but decided
instead to tap credit markets after a tax-rule change from the
Obama administration.
Moody's Investors Service said Monday that it assigned a
provisional rating of A3 to the Medtronic bonds, one notch below
where the company was previously rated, but still well within
investment-grade territory. Moody's said the A3 rating "will
reflect its large scale and diversification, tempered by a strong
commitment to shareholders and relatively high gross debt
levels."
An outstanding 2024 bond from Medtronic recently traded to yield
1.09 percentage points more than comparable Treasurys, for a yield
of 3.409%, according to MarketAxess.
Write to Mike Cherney at mike.cherney@wsj.com
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