Anheuser-Busch InBev NV recently started offering bonds that will back its takeover of SABMiller Plc in a sale that is likely to stretch into Europe and become the biggest corporate-debt offering on record.
The brewer may sell about $25 billion of dollar-denominated bonds in as many as eight parts, according to people familiar with the matter. Maturities will range from three to 30 years, according to a regulatory filing. The company has lined up $75 billion of loans to help fund the takeover, and it is expected to tap debt markets in other regions later.
"It’s a well-telegraphed deal of a global company with a solid business, but, ultimately, it will come down to price," said Matthew Duch, a money manager at Calvert Investments in Bethesda, Maryland, which oversees more than $13 billion in assets. "There is an expectation that the company will have to leave something on the table to get the deal done, but there are plenty of investors looking for quality assets to buy."
The sale is the biggest test in years for credit markets that are grappling with a slowdown in China, a commodities slump, and the first US interest-rate hike in almost a decade. The concern has pushed corporate borrowing costs to the highest in more than three years.
The dollar offering alone would be eclipsed only by Verizon Communications Inc.’s $49-billion deal two years ago to fund its buyout of Vodafone Group Plc’s stake in a wireless venture.
Officials at AB InBev declined to comment on the bond sale when contacted by email.
The deal includes a 30-year note at initial spread guidance of around 225 basis points above benchmark securities, said the people, who asked not to be identified because the terms aren’t set. It also includes a ten-year bond with initial spread talk of around 180 basis points above benchmarks and a three-year security with initial spread guidance of around 120 basis points.
Fed Policy
The offering is the biggest since the Fed ended its zero-rate monetary policy last month and comes at an increasingly volatile time in credit markets. Investment-grade bond buyers are demanding a premium of 180 basis points over treasuries, the most in about three years, according to Bank of America Merrill Lynch bond indexes.
"Even though spreads are wide in the corporate bond market, in the longer-term context of the absolute interest rate [company borrowing costs are low]," said Joe Mayo, the head of credit research at Conning, a global insurance investment manager with about $92 billion under management.
The company agreed to buy SABMiller in October for about $110 billion. Combined, they would produce almost one in three beers worldwide. The takeover would give AB InBev beer brands such as Peroni and Grolsch and control of about half of the industry’s profit.
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