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Western Digital launches downsized US$5.225b M&A bond

[NEW YORK] Western Digital launched a smaller-than-expected US$5.225 billion two-part bond offering Wednesday to help finance its acquisition of SanDisk, sources familiar with the matter told IFR.

The company reduced the overall size of the deal by US$375m and shifted US$275 million from the unsecured component of the sale to the secured tranche, after hiking the yields on offer on Tuesday to lure investors into the deal.

The hard disk maker originally planned to raise US$5.6 billion from the bond and has now increased the term loans in the financing package to make up the US$375 million difference.

Lead underwriter Bank of America Merrill Lynch launched the US$1.875 billion seven-year non-call three secured tranche at a final yield of 7.375 per cent, inside talk of 7.5 per cent area.

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The US$3.35 billion unsecured eight-year non-call three launched at 10.5 per cent, in line with talk.

Both notes jumped in the grey market late Wednesday, with the secured quoted at a cash price of 101.75-102.5 and the unsecured spotted at 100.25-101.25, according to one investor.

Standard & Poor's said in a note that Western Digital's ratings would be unaffected by the company's plan to reallocate as much as US$750 million of its capital structure from unsecured to secured debt.