NEW YORK: AT&T Inc and Discovery Inc kicked off marketing on a bond sale that’s expected to be one of the largest offerings ever as they seek to fund their media business combination. The deal will test a market that’s been rattled by inflation and Russia’s invasion of Ukraine.
The two companies are selling bonds in as many as 11 parts, according to a source. The longest portion of the offering, a 40-year security, may yield 3.25 percentage points above Treasuries, said the source.
The offering could be around US$25bil (RM104.61bil) to US$30bil (RM125.53bil), according to a source, making it potentially the largest issuance since AbbVie Inc’s bond sale to help finance its acquisition of Allergan Plc in 2019 and possibly the fifth-biggest US high-grade bond issue on record, according to data compiled by Bloomberg.
Demand for the sale had reached more than US$70bil (RM292.91bil) mid-morning in New York.
In May, AT&T said it will spin off its media assets, which include HBO, CNN and the Warner Bros studio, and merge them with Discovery in a US$43bil (RM180bil) deal.
The transaction, which is expected to close in April, will unite the broadcaster of 90 Day Fiancé and Property Brothers with the company behind Succession and the Batman movies, creating a media giant with cable channels, a movie studio, and at least two streaming services (Discovery+, HBO Max). The combined company, to be called Warner Bros. Discovery, will have about US$55bil (RM230bil) in debt.
If the bond sale is well received by investors it may give other companies the confidence to issue debt in a credit market that has been spooked by geopolitics and monetary policy changes. Goldman Sachs Group Inc, JPMorgan Chase & Co and Barclays Plc are managing the offering, the source said.
The large high-grade bond offering may also be impacting the Treasury market. The long-end of the US government bond curve dropped to session lows Wednesday morning in New York and remains under pressure after the deal announcement.
And long-end swap spreads have continued to widen, indicative of how money flows linked to corporate issuance may be weighing on the long-end of the curve.
US investment-grade bond sales have roared back to life in recent weeks even as the cost to borrow is increasing, a sign that companies want to lock in funding now amid expectations that the volatility will persist.
About US$80bil (RM334.76bil) of bonds have been sold already in March as syndicate desks have been waiting to pounce on an opportunity to sell debt. — Bloomberg
Already a subscriber? Log in
Get 20% OFF The Star Digital Access
Cancel anytime. Ad-free. Unlimited access with perks.
