--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 email@example.com and Patrick McGee at firstname.lastname@example.org