Visa Inc. raised $16 billion in its first bond sale to finance the payment network’s 21.2 billion euro ($23.3 billion) takeover of Visa Europe Ltd.
The deal is the fourth-largest corporate debt offering this year after Actavis Plc’s $21 billion debt sale to buy Allergan Inc., AT&T Inc.’s $17.5 billion bond offering funding the purchase of DirectTV and AbbVie Inc.’s $16.6 billion financing to buy Pharmacyclics Inc.
“It’s an inaugural issuance, it’s across the curve, and this very well could be one of the last major investment-grade deals of 2015,” said Jesse Rosenthal, an analyst at CreditSights Inc. “Visa bonds are prime candidates for long-term buy and hold portfolios.”
Visa’s is the latest in a string of large bond deals in a year where investment-grade companies have issued a record $1.28 trillion of debt before the Federal Reserve raises interest rates for the first time since 2006. Fed Chair Janet Yellen and other policy makers at the U.S. central bank have signaled they remain prepared to raise their key rate as soon as their next meeting starting Dec. 15.
The Fed meeting “creates another unknown in the market environment and speaks to the reason why doing a deal of this size at a time when it’s still not so close to the meeting is probably ideal,” said Jody Lurie, a corporate credit analyst at Janney Montgomery Scott LLC. “We are at a point where if the company waited any longer, it would probably have to wait until January, given the market expectations for this month.”
Visa sold the notes in six parts, according to data compiled by Bloomberg. The longest dated part of the sale was $3.5 billion in 4.3 percent 30-year bonds that yield 1.32 percentage points more than similar-maturity Treasuries, according to a person with knowledge of the offering. That’s less than the initially offered spread of 1.55 percentage points, said the person, who asked not to be identified because the information isn’t public.
The yield represents a 21 basis points discount for the company compared to bonds of similar maturity and rating, according to Bank of America Merrill Lynch Indexes.
The acquisition will allow Visa to unify its brand globally after eight years as separate companies. The lack of contributions to earnings from Europe has long been seen as a weakness for Foster City, California-based Visa and an advantage for smaller competitor MasterCard Inc., which owns its European business.
The deal is expected to be completed by June 30, according to a Nov. 2 statement.