AB InBev readies to sell $46bn in bonds

Deal to help brewer fund SABMiller takeover

ANHEUSER-Busch InBev (AB InBev) is selling $46 billion (R766bn) of bonds to finance its takeover of SABMiller, setting up what is likely to be the biggest corporate-debt offering yet, according to people with knowledge of the matter.

That was more than the $25bn the brewer initially sought, said the people, who asked not to be identified as they were not allowed to speak publicly. The company received $110bn of orders, the most yet for a corporate bond deal.

With the company still potentially raising debt in other currencies, the deal may surpass the $49bn Verizon Communications raised two years ago in the biggest corporate bond offering on record.

“This has been a highly anticipated deal which checks several attractive points in this market,” said Dorian Garay, a money manager for an investment-grade debt fund at NN Investment Partners. “InBev will enter into a deleveraging path after the acquisition which offers more visibility compared to other names that are actively looking for acquisitions and event risk is high.”

The company had lined up $75bn of loans to help fund the takeover.

The sale is the biggest test in years for credit markets that are grappling with a slowdown in China, a commodities slump and the first US interest-rate hike in almost a decade. The concern has pushed corporate borrowing costs to the highest in more than three years.

AB InBev officials declined to comment on the bond sale.

The deal included a 30-year note at initial spread guidance of about 210 basis points above benchmark securities, said the people. While that is down from the 225 basis points initially offered, it is a 53 basis-point premium compared with bonds of similar maturity and rating, according to Bank of America Merrill Lynch indices.

“A deal this big usually has to come with a concession,” said Jack Flaherty, a money manager in New York at GAM Holdings. “We are buying.”

The offering comes at a volatile time in credit markets. Investment-grade bond buyers demand a premium of 180 basis points over Treasuries, the most in about three years, according to Bank of America Merrill Lynch bond indexes.

“Even though spreads are wide in the corporate bond market, in the longer-term context of the absolute interest rate” company borrowing costs were low, Conning head of credit research Joe Mayo said. – Bloomberg