CVS’s $44B bond sale to help pay for Aetna deal
CVS has agreed to buy Aetna for $69 billion. AP
CVS (NYSE:CVS) plans to sell about $44 billion of bonds to help pay for its $69 billion purchase of Aetna (NYSE:AET) in what would be the largest corporate bond sale in more than two years. “Everyone on the buy side is going to be looking at this deal,” Matt Salzillo, a portfolio manager for Ryan Labs Asset Management, an asset management firm with about $7 billion of bond investments, told The Wall Street Journal. “We want to see how well the CVS deal is absorbed by the market.”
Corporate bond yields have jumped along with U.S. interest rates this year, while overall debt sales have declined, the Journal reported. Issuance of investment-grade corporate bonds dropped to $217 billion in January and February, compared with $256 billion a year earlier, according to data from S&P Global. Fund managers deal hope the CVS bond deal's size and market conditions will force the drugstore chain to pay a higher yield on the new debt than on its current bonds.
Ticker | Security | Last | Change | Change % |
---|---|---|---|---|
AET | NO DATA AVAILABLE | - | - | - |
CVS | CVS HEALTH CORP. | 58.07 | -1.23 | -2.07% |
The company's bonds due in 2026 yielded 4.19% on Monday, according to data from MarketAxess. Fund managers estimated that the new debt could yield 0.15 percentage point to 0.25 percentage point more, the Journal reported.
“Underwriters would be smart to bring this deal with a generous concession to the market,” Brian Kennedy, a portfolio manager at Loomis Sayles & Co., which manages $76 billion of investment-grade corporate bond investments, told the Journal. “Volatility is back, and this one could give the market indigestion.”