Market Extra: Pfizer borrows $31 billion in mega bond deal as debt issuance picks up ahead of debt-ceiling deadline

by | May 16, 2023 | Stock Market

Pharmaceutical giant Pfizer secured $31 billion in financing on Tuesday, as companies pick up the pace of borrowing ahead of potential market turmoil tied to the U.S. debt-ceiling fight. Pfizer
borrowed the funds via an eight-tranche bond deal that will go toward its roughly $43 billion acquisition of Seagan, a biotech focused on creating therapies to treat cancer, according to public documents tied to the financing.

Pricing on the bonds, rated A1 by Moody’s Investors Service, narrowed about 20 basis points from initial expectations, with the $5 billion class of 10-year bonds clearing at a spread of 125 basis points above the risk-free Treasury rate
or a yield of about 4.7%, according to a person with direct knowledge of the dealings. Bankers initially pitched the bonds to investors at a range of Treasurys plus 145 basis points, according to CreditSights. Lower spreads mean investors receive less compensation. The bond deal ranks as the fourth-largest on record for the U.S. investment-grade corporate bond market, according to data from Informa Global Markets. Analysts at BofA Global this week noted an uptick in U.S. investment-grade corporate bond supply, with issuance in May (see chart) already exceeding the $69 billion priced in April.

Corporate bond supply is picking up ahead of June, when the U.S. is expected to be unable t …

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