Abbott Laboratories sold $14.7 billion of bonds yesterday in the largest dollar-denominated offering in more than three years as the drug and medical-device maker prepares to split in two.
Abbott issued bonds in six parts through its AbbVie Inc. pharmaceutical unit, ranging in size from $500 million to $4 billion, according to data compiled by Bloomberg. Proceeds will help fund a $7.7 billion tender offer related to AbbVie’s spinoff.
The offering is the largest dollar-denominated sale since February 2009, when Roche Holding AG issued $16 billion of debt, Bloomberg data show. Following disruptions last week to the market from Hurricane Sandy, the biggest Atlantic storm in history, companies are issuing debt and seizing advantage of near record-low borrowing costs
“This has been a deal that’s been pretty well anticipated,” Scott Kimball, a money manager at Taplin Canida & Habacht LLC, a BMO Financial Group unit that oversees $7.3 billion, said in a telephone interview. “The bond market missed a few days last week to closures. You’re probably finding some pent-up demand.”
The portions include $500 million of three-year floating-rate notes that priced to yield 76 basis points more than the three-month London interbank offered rate and $3.5 billion of 1.2 percent, three-year fixed-rate debentures to yield 85 basis points more than similar-maturity Treasuries, Bloomberg data show.
In addition, the company sold $4 billion of 1.75 percent, five-year bonds at a relative yield of 110 basis points, $1 billion of 2 percent, six-year notes at a spread of 140 basis points, $3.1 billion of 2.9 percent, 10-year debt at 130 basis points, and $2.6 billion of 4.4 percent, 30-year securities at 160, the data show. The six-year bond was added after the deal’s announcement, according to a person familiar with the transaction, who asked not to be identified citing lack of authorization to speak publicly.
The deal’s size “makes sense given the demand technicals in the market,” Ashish Shah, head of global credit investments at New York-based AllianceBernstein LP, which oversees $230 billion in fixed-income assets, said in a telephone interview. “It’s a good time to be an issuer in the bond market.”
Abbott, which makes the world’s top-selling medicine the arthritis drug Humira, previously issued debt in May 2010, selling $1.25 billion of 5.3 percent, 30-year bonds, $1 billion of 4.125 percent, 10-year securities and $750 million of 2.7 percent, five-year debt, according to data compiled by Bloomberg. The bonds due May 2020 traded at 116.1 cents on the dollar to yield 1.84 percent on Oct. 18, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
The bonds are rated Baa1 by Moody’s Investors Service, the ratings company said yesterday in a statement.
“AbbVie’s Baa1 rating reflects the blockbuster success of Humira and the product’s good growth outlook, offset by higher leverage and greater product concentration risk than pharmaceutical peers,” Michael Levesque, Moody’s analyst, wrote in the report.
Adelle Infante, a spokeswoman for Abbott, declined to comment on the sale.
Abbott made a tender offer for four bonds with $4.75 billion outstanding and as much as 47.2 percent on five other issues with $6.25 billion, the company said in an Oct. 26 statement.
Proceeds from the offering will be used to provide a net cash distribution to Abbott Park, Illinois-based Abbott of about $8.5 billion to complete the separation, Chief Financial Officer Thomas Freyman said on an Oct. 17 conference call. AbbVie plans to raise about $16 billion of debt related to the spinoff.
It’s “a somewhat defensive industry and I’m not surprised we’re seeing as much demand as we are,” Wilmer Stith, a portfolio manager at Wilmington Trust Investment Advisors Inc. in Baltimore, said in a telephone interview. “Investors have an insatiable need for achieving higher income levels.”