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(Bloomberg) – Oracle Corp. sold $ 15 billion worth of bonds on Monday in the second-largest offering this year, pulling down revisions from Fitch Ratings and Moody’s Investors Service.
While the product will pay off debt until next year, it is a “deviation” from Fitch’s expectations that Oracle will reduce its debt when due, according to a statement released Monday. Fitch cut the level a notch to BBB +, three steps above speculative. Moody’s downgraded two levels to Baa2, a notch below Fitch’s rating.
The company’s bonds were among the worst performing in the high-quality market on Monday. The most traded bonds, the 3.6% due 2050, widened by 31 basis points to about 144 basis points versus Treasuries, according to Trace. The new bonds due in 2051 cost a spread of 155 basis points, according to a person with knowledge of the matter.
The downgrades “may raise new issue concessions high enough to attract considerable demand,” Bloomberg Intelligence analysts Robert Schiffman and Suborna Panja said in a report ahead of the deal’s launch. Oracle’s actions have changed little.
Second biggest
At $ 15 billion, Oracle’s bond sale is the second largest this year behind Verizon Communications Inc., which borrowed $ 25 billion earlier this month to help fund spectrum purchases. Apple Inc. issued $ 14 billion in bonds last month in an attempt to return more cash to shareholders.
Oracle is targeting all of its $ 1.5 billion in notes due 2021, the $ 4.25 billion in 1.9% bonds due 2021 and an additional $ 2.5 billion due 2022, according to a deposit. The product can also be used for stock buybacks, dividends, debt repayment and future acquisitions, among other general corporate purposes.
The software company has sold six-part bonds, and the longest, a 40-year security, will return 170 basis points above T-bills, said the person, who asked not to be identified because details are private. Bank of America Corp., Citigroup Inc., Deutsche Bank AG, JPMorgan Chase & Co. and Wells Fargo & Co. handled the sale, according to the filing.
(Updates with pricing information starting in the first paragraph.)
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