CVS starts debt sale to pay $68B Aetna deal

Pharmacy giant got $49B in bridge loans from20 lenders.

CVS Health kicked off what’s likely to be one of the largest corporate-debt ever as it seeks to fund $67.5 billion acquisition of Aetna. deal as investment-grade bonds have had their worst start to the year in decades. Yields on grade bonds have risen half a percentage point since the start of 2018, pushing up the cost of debt and lowering issuance overall. With average yields still close to unprecedented lows, companies are turning to debt markets to fund their acquisitions. The extra yield investors demand to hold the debt over Treasuries widened to 1 percentage on Friday as investors made way for expected jumbo deal. giant is selling fixed and floating-rate senior unsecured bonds in as many as nine parts, according to a person with knowledge of the matter. The longest portion of the of fering, a 30-year security, may yield 2.15 percentage points above Treasuries, person said, asking not to be identified as the details are private. CVS gathered $49 billion in bridge loans from 20 lenders in December as temporary fi financing for the acquisition, setting up for Tuesday’ s transaction. CVS is targeting as much as $44.8 billion of new debt, according to a Feb. 26 presentation. The company is trying to win regulatory approval for its plan to buy Aetna, which will bring together around 10,000 CVS stores and Aetna’s 22 million customers. The deal is among the biggest health-care mergers of the past decade and would create a behemoth will tryto shift some of Aetna customers’ care away from doctors and hospitals and into thousands of CVS stores. The merger is expected to closein the second half of this year. Working in CVS’s favor is that investors will viewit as ahealth-care name instead of a retail one, said Mickey Chadha, an at Moody’s Investors Service. The completion of the acquisition will likely result in a one-notch downgrade to the current Baa1 rating, three steps above speculative-grade, Chadha said. “It’s a strategic, sound transaction for longer-term, but CVS has to integrate another company has not necessarily been done before between a retailer and an insurance company,” he said .“There are elevated risks in terms of that execution.” Verizon Communications the record in 2013 with its $49 billion offering to buy out Vodafone Group’s stake in Verizon Wireless, followed by Anheuser-Busch InBev’s $46 billion sale to purchase SAB Miller in 2016. Broadcom Ltd. last month lined up as much as 106 billion of debt to back its proposed acquisition of Qualcomm, but the target company has rejected several offers and no debt has been offered yet.