Oracle Sells $14 Billion in Bonds as Investment Grade Weathers Brexit
June 29 2016 - 3:50PM
Dow Jones News
Oracle Corp. sold $14 billion of bonds Wednesday, underscoring
the strength of the investment-grade corporate bond market in the
aftermath of the U.K.'s vote to leave the European Union last
week.
Split among five tranches, the offering from the Redwood City,
Calif., maker of business software is the third-largest bond deal
of the year, behind Anheuser-Busch InBev NV's $46 billion issuance
in January and Dell Inc.'s $20 billion placement last month. It
comes a day after Molson Coors Brewing Co. broke an unusual
four-day drought of new issuance by selling $5.3 billion of new
bonds.
Although bankers were hesitant to test investors immediately
before or after the Brexit vote, the sales show the resilience of
demand for high-quality bonds, which offer investors a relatively
safe place to put their money while offering a little more yield
than U.S. government bonds.
Pulled down by falling Treasury yields, the average yield of
investment-grade corporate bonds was 2.9% at the end of Tuesday,
down from 3.03% last Thursday before the Brexit vote was tallied,
according to Barclays PLC data. Over the same period, the yield the
benchmark 10-year Treasury note fell to 1.463% from 1.741%.
Bond yields fall when their prices rise.
Oracle's bond offering included a $3 billion, 10-year note
priced to yield 1.2 percentage points above Treasurys. Proceeds
from the offering are earmarked for general corporate purposes,
which could include share repurchases and future acquisitions,
according to SEC filings.
Express Scripts Holding Co. and General Motors Financial Company
Inc., a subsidiary of General Motors Co., were also poised to price
substantial bond deals Wednesday. Express Scripts is selling $4
billion of new bonds, while General Motors is issuing $2 billion of
bonds, according to LCD, a unit of S&P Global Market
Intelligence.
The new issue market for junk-rated corporate bonds, on the
other hand, has yet to pick up since the Brexit vote. That
lower-rated debt is suffering from reduced demand for riskier
assets amid uncertainty over the global economy, investors and
analysts said.
No corporate junk bond has priced since June 20, when the
propane gas distributor AmeriGas Partners LP issued $1.35 billion
of new bonds, according to LCD.
The average yield of U.S. junk-rated bonds was 7.5% Tuesday, up
from 7.09% last Thursday, according to Barclays.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
(END) Dow Jones Newswires
June 29, 2016 16:35 ET (20:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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