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[NEW YORK] Brewing giant AB InBev on Wednesday announced a much-awaited bond to help finance its purchase of rival SABMiller, an up to eight-part deal that could be one of the largest bonds ever.
The offering is expected to be a solid success in the investment-grade bond market, which has got 2016 off to an uneven start due to broader overall volatility.
The maker of Budweiser and Stella Artois, rated A2 by Moody's and A- by Standard & Poor's, could target US$25 billion or more with the bond, which was expected to price later Wednesday.
The company has backed its more than US$100 billion bid for SABMiller with a record US$75bn syndicated loan, TRLPC reported in November, and the bond will take out some of that debt.
Bank of America Merrill Lynch, Barclays and Deutsche Bank are the global coordinators on the bond offering. Mitsubishi UFJ, Santander and Societe Generale are joint bookrunners.
US companies have rushed to the bond markets to finance acquisitions and share buybacks, selling a record US$1.269trn of new bonds in 2015.
"(The AB InBev deal) will help establish a clearing level for large deals, and also help pave the way for more M&A deals to come," one syndicate banker told IFR on Tuesday.
The current record bond is Verizon's US$49 billion deal in 2013.
AB InBev appeared to be offering new issue concessions of 30bp-40bp on the bond, which has maturities between three and 30 years. That indicates an interest payment of around 5.15 per cent on the longest dated 30-year issue.
Those premiums are well inside the whopping ones Verizon offered on its September 2013 record deal - even amid worries out of China, flagging commodities prices and other woes that have caused much volatility of late.
"Pricing looks very disappointing," one investor told IFR. "There's around a 35bp-40bp NIC across the tranches - very modest, if at all. There's plenty (of deals still) to come down the pipe, so it's not too much of a draw for us at these levels."
Verizon offered a 50bp NIC on top of the 50bp widening in its curve after announcing its US$130 billion acquisition of Vodafone's stake in Verizon Wireless in one hit.
Since those days, however, the dollar bond market has repeatedly shown its ability to absorb trillions of dollars in debt issuance.
AB InBev's spreads have also widened in anticipation of the deal.
A 30bp premium would be high in the investment-grade market for such a well-heeled corporate name, but not exceptional given the potential size of the offering, bankers said. "If you compare to where the secondaries were quoted last week, you still have a concession of 50bp-60bp," said one banker. "If the market presents an opportunity I am sure they will take more."