The bond offering clients are thirsting for

The bond offering clients are thirsting for

The bond offering clients are thirsting for Anheuser-Busch InBev NV is selling $46 billion of bonds to finance its takeover of SABMiller Plc, setting up what’s likely to be the biggest corporate-debt offering ever, according to people with knowledge of the matter.

That’s more than the $25 billion the brewer initially sought, said the people, who asked not to be identified citing lack of authorization to speak about it publicly. The company received $110 billion of orders, the most ever for a corporate bond deal. With the company still potentially raising debt in other currencies, the deal may surpass the $49 billion Verizon Communications Inc. 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 New York-based 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 $75 billion 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 U.S. interest-rate hike in almost a decade. The concern has pushed corporate borrowing costs to the highest in more than three years.
Officials at AB InBev declined to comment on the bond sale when contacted by e-mail.

Big Premiums

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

“A deal this big usually has to come with a concession,” said Jack Flaherty, a money manager in New York at GAM Holdings AG, which oversees $127 billion. “We are buying."

The offering is the biggest since the Fed ended its zero- rate monetary policy last month and comes at an increasingly volatile time in credit markets. Investment-grade bond buyers are demanding 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 are low, said Joe Mayo, the head of credit research at Conning, a global insurance investment manager with about $92 billion under management.

The company agreed to buy SABMiller in October for about $110 billion. Combined they would produce almost one in three beers worldwide. The takeover would give AB InBev beer brands such as Peroni and Grolsch and control of about half of the industry’s profit.

Aleksandra Gjorgievska and Cordell Eddings
with assistance from Sally Bakewell