Meta targets US$7 billion in its second blue-chip bond sale

META Platforms emerged as the first mega-cap technology company to tap the US investment-grade bond market amid turmoil in the financial sector that has toppled five banks since March.

The social media behemoth, which reported earnings last week, raised US$8.5 billion in a five-part deal, according to a person familiar with the matter. The longest portion of the offering, a 40-year security, yields 192 basis points over Treasuries, less than initial discussions for about 215 basis points.

Eleven companies came forward with bond offerings on Monday (May 1) as issuers looked to sell debt before the Federal Open Market Committee meeting and subsequent rate decision Wednesday. Other notable high-grade issuers were the Hershey, which sold US$750 million in bonds and Comcast, which was out with a US$5 billion, four-part deal. Over US$22 billion was set to price on the day.

The scope of issuance in the wake of JPMorgan Chase & Co’s rescue of First Republic stands in contrast to the reaction seen in the primary market to the banking crisis that began unfolding in March. Days after Silicon Valley Bank’s collapse, at least eight potential issuers stood down. The fallout led to March issuance coming in at about US$100 billion, well below projections of US$150 billion.

Meta raised US$10 billion in its first ever corporate bond issue last year. The Facebook parent plans to use the fresh funds to help finance capital expenditures, repurchase outstanding shares of its common stock, and for acquisitions or investments, the person added.

Bank of America, JPMorgan and Morgan Stanley were the bookrunners on Meta’s deal.

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The Menlo Park, California-based company has spent the last months cutting costs and restructuring its workforce, while advertising sales rebounded in the first quarter. Even though it touts strong cash flow, the company is likely looking to shore up extra cash for future bond buybacks, according to Bloomberg Intelligence analyst Robert Schiffman.

“After it boosted repurchase authorisation by US$40 billion in January, we envision shareholder returns will keep growing — similar to Alphabet and Apple — as free-cash-flow prospects improve,” he wrote in a note. “With initial price talk wide to peers, we perceive little credit risk and strong relative value out the curve.”

Representatives for Meta did not immediately respond to a request for comment. Comcast declined to comment. A representative from Hershey referred Bloomberg to its press release. BLOOMBERG