AGN Allergan plc

By Sam Goldfarb 

AbbVie Inc. is set Tuesday to sell as much as $30 billion of bonds to help fund its acquisition of Allergan PLC, taking advantage of investors' strong demand for higher-quality business debt to bring what would be one of the largest corporate-bond sales on record.

Like other investment-grade companies that have completed large bond sales in recent years, AbbVie is expected to have little trouble selling its debt. After holding calls with investors last week, the drugmaker is expected to issue as many as 10 different bonds with maturities ranging from 1 1/2 years to 30 years.

Exactly where AbbVie's deal ranks in history should be known later Tuesday. If it ends at the higher end of expectations, it would be the fourth-largest investment-grade sale on record, exceeding Comcast Corp.'s $27 billion sale in October of last year, according to Dealogic.

For AbbVie, buying Allergan would give it a dominant position in the $8 billion-plus market for beauty drugsj, such as Botox, as it attempts to diversify beyond Humira, its top-selling rheumatoid-arthritis drug.

After the acquisition, the company's ratio of net debt to earnings before interest, taxes, depreciation and amortization is expected to almost double to 3.4 times, according to the research firm CreditSights. The company, though, is hoping to bring that ratio down to 2.5 times by the end of 2021 by using free cash flow to pay down around $15 billion to $18 billion of debt.

In their first offer to investors Tuesday, banks proposed a yield on AbbVie's new 10-year notes that would be 1.5 percentage points above the comparable U.S. Treasury yield, investors said. That was later lowered to 1.35 percentage points.

By comparison, the company's existing bonds due in 2028 recently traded at a 1.27 percentage-point spread to Treasurys, according to CreditSights.

In recent trading, the yield on the benchmark 10-year U.S. Treasury note was 1.924%, according to Tradeweb, compared with 1.930% Friday. The bond market was closed Monday for Veterans Day.

Even with a recent increase in Treasury yields, it remains a favorable borrowing environment for most companies. The average U.S. investment-grade corporate-bond yield was 3.0% Friday, up from around 2.8% in early October but still down from 4% in January, according to Bloomberg Barclays data.

So far this year, companies have sold around $1.25 trillion of investment-grade corporate bonds in the U.S. market, according to Dealogic. That is a little more than were sold at this point last year, though off the record-setting pace from two years ago.

Write to Sam Goldfarb at sam.goldfarb@wsj.com

(END) Dow Jones Newswires

November 12, 2019 13:17 ET (18:17 GMT)

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