Broadcom Inc. recently borrowed $5 billion in the U.S. investment-grade bond market in order to refinance some of the loans it had taken out for its $69 billion acquisition of VMware Inc. The company is selling its debt in three parts, with the longest tranche offering a yield of 0.95 percentage points more than Treasuries, according to a source familiar with the matter. This comes after Broadcom secured up to $28.4 billion in new debt commitments last year to finance the acquisition and pay down a shorter-term loan while awaiting regulatory approvals.
The planned debt sale will allow Broadcom to prepay a portion of its existing loans and be used for general corporate purposes, with at least $23.4 billion in debt remaining to be refinanced. Robert Schiffman, a senior credit analyst at Bloomberg Intelligence, noted that the company will likely issue bonds to extend its maturity profile slightly and have the ability to further deleverage over the medium term. Issuers like Broadcom have been benefiting from lower financing costs due to historically low risk premiums and falling yields.
Bank of America Corp., BNP Paribas SA, and HSBC Holdings Plc are leading the bond sale for Broadcom. The company’s initial $32 billion bridge loan in 2022 to finance the VMware acquisition was the largest M&A financing package in over a year, showcasing the scale of the transaction. Prior to this, banks had committed $41.5 billion to facilitate the spinoff and merger of AT&T Inc.’s media business with Discovery Inc.
Overall, Broadcom’s recent debt issuance and refinancing efforts show the company’s strategic financial management in the wake of large acquisitions. The bond sale and repayment of loans will help optimize the company’s debt structure and potentially reduce financing costs in the long term.
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https://finance.yahoo.com/news/broadcom-kicks-off-bond-sale-153619532.html
