Broadcom Inc. utilized the U.S. investment-grade bond market to refinance some of the debt it acquired during its $69 billion acquisition of VMware Inc. The company plans to sell the debt in at least three parts, with the longest tranche expected to yield 1.25 percentage points above U.S. Treasuries. This debt sale comes more than seven months after Broadcom completed its acquisition of VMware and nearly a year after securing up to $28.4 billion in new debt commitments to finance the purchase.
The committed financing for the acquisition was divided into three parts: a $10.7 billion A-2 credit facility, a $10.7 billion A-3 credit facility, and a $7 billion A-5 credit facility. The proceeds from the debt sale will be used to prepay a portion of the A-2 loans and for general corporate purposes, with the remaining debt still needing to be refinanced. Broadcom aims to slightly extend its maturity profile and further deleverage over the medium term through this refinancing.
Banks involved in the bond sale include Bank of America Corp., BNP Paribas SA, and HSBC Holdings Plc. Broadcom’s initial $32 billion bridge loan in 2022 for the VMware acquisition was the largest M&A financing package in over a year. Previously, banks had committed $41.5 billion to facilitate the spin-off and merger of AT&T Inc.’s media business with Discovery Inc.
Issuers like Broadcom have benefited from lower financing costs as risk premiums remain low and yields continue to fall. Overall, the bond sale will allow Broadcom to manage its debt obligations more effectively and position the company for future growth.
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https://www.bnnbloomberg.ca/broadcom-kicks-off-bond-sale-to-refinance-loans-for-VMware-deal-1.2093959
