INTEL sold US$11 billion in the blue-chip bond market to help fund capital expenditures after a trio of rating downgrades, luring strong demand on Wall Street.

The notes were issued in seven parts, according to a person familiar with the matter. The longest portion of the deal, a 40-year tranche, yielded 215 basis points over Treasuries — compared to earlier guidance of 235 basis points, said the person, who asked not to be identified as the details are private.

The Santa Clara, California-based semiconductor manufacturer intends to use the funds to refinance debt and for general corporate purposes, including funding for working capital, the person said.

Intel didn’t immediately respond to a request for comment.

The tightening in yield is evidence of just how strong investor demand has become for fresh high-grade debt, with Intel’s deal luring about US$42 billion in orders, according to a person familiar. Even amid the company’s headwinds, it’s an indication that firms are still betting on favourable conditions after a rally in high-grade-debt pushed risk premiums to the lowest since April.

The offering comes on the heels of weaker-than-expected fourth-quarter earnings and a series of downgrades from major credit assessors.

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Moody’s Investors Service downgraded Intel’s senior unsecured debt to A2 from A1 last week, citing “a significant pressure” on the company’s credit profile over the next one to two years. Fitch cut its long-term issuer default rating to A- from A+. Intel’s long-term rating was also lowered earlier this month by S&P Global Ratings. The outlook remains negative at all three credit graders.

The picture is also challenging for the semiconductor industry broadly. Capital expenditures are surging across the sector, and supply shortages have rapidly shifted to excess inventory, according to Bloomberg Intelligence analyst Robert Schiffman.

Intel’s chief executive officer Pat Gelsinger, meanwhile, has been spending heavily on a bid to reassert the company’s dominance, putting an unprecedented strain on its finances amid a sharp drop in demand for computer components and market share loss to rivals. Intel’s 2022 capital expenditures guidance of US$21 billion is 50 per cent greater than its spending in 2018.

“Despite recent pullbacks, capital spending for the largest chip providers is expected to increase considerably over the next three years,” Bloomberg Intelligence’s Schiffman wrote in a note.

Intel’s debt load is likely to remain elevated due to working capital uses, significant capital spending and dividend payments, S&P analysts David Tsui and Andrew Chang wrote in a Tuesday (Feb 7) statement.

The chipmaker last sold 40-year notes in August. That bond fell nearly 2 US cents in secondary markets on Tuesday to trade at about 90 US cents as of 1.33 pm New York time, according to Trace data. Its interest coupon is 5.05 per cent.

Intel had US$42 billion of outstanding debt as of the end of 2022, according to Bloomberg Intelligence. BLOOMBERG