Intel's US$7b bond attracts over US$20b in investor demand

New York

INTEL is on track to price a US$7 billion bond to help finance its acquisition of chipmaker Altera after attracting more than US$20 billion in investor demand.

The deal, split across four tranches ranging in maturities from five to 30 years, had been long-expected by market participants. Initially marketed in June to European investors, the company held off announcing the deal until Thursday (Singapore time) because of market volatility.

Its decision to wait for calmer conditions, and the release of strong second quarter results, clearly paid off as investors rushed to grab a deal that was smaller than initially expected. Initial new issue concessions - in the range of 20-30 basis points (bp) - were a strong selling point in the wake of recent volatility that sent spreads on high-grade bonds to their widest in two years.

Lead managers Bank of America Merrill Lynch and Wells Fargo were able to pull in pricing from anywhere between 15 and 25bp from start to finish. That left new issue concession of anywhere between flat and 15bp depending on the tranche. Even then, investors said that they were getting a decent premium to both Intel's own curve, which had widened considerably in anticipation of this deal, and its competitors.

"The big story is that we are at two-year wides on spreads, and a lot of that has been driven by these large issues coming to market and repricing," said Matt Duch, portfolio manager, taxable fixed-income at Calvert Investments. "But even though spreads on existing holdings are widening, the new issues are coming at decent premiums."

Michael Dimler, senior credit analyst at Morningstar put fair value on an Intel five-year at Treasuries plus 70bp, 90bp on a seven-year, 110bp on a 10-year and 175bp on a 30-year bond. IFR