--AbbVie prices largest debt offering of 2012, third-biggest in
17 years of data
--Orders hit $37 billion by late morning New York time
--Deal was postponed from last week because of Superstorm
Sandy
(Adds final pricing in 10th paragraph; updates throughout.)
By Katy Burne and Patrick McGee
Abbott Laboratories (ABT) unit AbbVie Inc. sold $14.7 billion
worth of bonds in the U.S. debt market's largest offering in more
than three years Monday.
The six-part deal was the third-largest U.S. corporate offering
on record, according to Dealogic, whose data goes back to 1995.
With help from seven other borrowers including Hong Kong
conglomerate Hutchison Whampoa Ltd. and Brazilian lender Itau
Unibanco Holding SA (ITUB, ITUB3.BR), AbbVie pushed Monday's
new-issue total to $21.35 billion. That marked the busiest day for
investment-grade bond sales in the U.S. since February 2009 and the
second-busiest on record, Dealogic says.
Orders for the mammoth deal hit $37 billion by late morning,
signaling investors remain ravenous for high-grade corporate
bonds.
"This is a perfect example of where we are in the marketplace,"
said Tom Murphy, portfolio manager at Minneapolis-based Columbia
Management. He said there is "insatiable appetite" for corporate
bonds despite the risks in Europe and the looming political
showdown over spending cuts and taxes.
High-grade corporate bonds have rallied since the Federal
Reserve announced new efforts to support bonds markets in
mid-September. The efforts motivated investors to sell
mortgage-backed bonds and pile into company debt instead. That
pushed bond prices higher, causing average yields on corporate debt
to drop to 2.69% from 2.91% and making it more enticing for
companies to borrow.
AbbVie had been expected to hit the market last week, but the
offering was delayed because of Sandy, investors said. The deal was
widely expected to do well because AbbVie is a first-time issuer.
That gives investors diversification in their portfolios, but also
means AbbVie had to pay higher yields to establish itself a track
record.
With part of the proceeds from its sale, AbbVie will provide a
cash distribution of about $8.5 billion to Abbott that the parent
company will use to pay down its own borrowings.
"Any deal of that sort of size, in a well-rated name, should
trade with good liquidity," said David Brown, head of
investment-grade credit at Neuberger Berman, which has nearly $94
billion in fixed income assets under management.
AbbVie's deal included three-year notes priced at 1.23%,
five-year notes at 1.794%, six-year notes at 2.094%, 10-year bonds
at 2.975%, and 30-year bonds at 4.463%. A floating-rate tranche due
in three years was priced to yield 0.76 percentage point over the
three-month London interbank offered rate, an industry
benchmark.
The deal was sold in the private-placement "Rule 144A" market.
That means only institutional investors could purchase the deal
because it isn't registered by the Securities and Exchange
Commission.
At least eight banks worked on the sale, including Barclays,
Bank of America Merrill Lynch, J.P. Morgan Chase, Morgan Stanley,
BNP Paribas, Societe Generale, Deutsche Bank, and the Royal Bank of
Scotland.
Before Monday, the largest deal of 2012 had been a $9.8 billion
offering from United Technologies Corp. (UTX) in May, according to
Dealogic data. The biggest in records going back to 1995 is still a
$16.5 billion deal from Roche Holding AG (RHHBY, ROG.VX, RO.EB)
from February 2009. The second largest was for France Telecom SA
(FTE, FTE.FR), at $16.4 billion in March 2001.
In October 2011, Abbott announced plans to separate into two
publicly traded companies: One would focus on diversified-medical
products retaining Abbott's name, and the other independent company
would be dedicated to research-based pharmaceuticals, called
AbbVie. The company expects to complete the spinoff by Jan. 1.
Abbott Chief Financial Officer Thomas Freyman said that
following the split, Abbott expects to have about $7.5 billion in
debt and around $5 billion in cash. AbbVie is expected to start
with $7 billion of cash.
Write to Katy Burne at katy.burne@dowjones.com and Patrick McGee
at patrick.mcgee@dowjones.com