Broadcom became the latest big company to take advantage of lower interest rates to issue bonds in the US market, as it repaid another slug of financing associated with its $61bn purchase of cloud services provider VMware, more than two years after the deal was announced.
The US semiconductor company hit the market on Thursday with a $5bn four part offering of three, five, seven and 10 year notes, with proceeds used to pre-pay another portion of the $28.4bn drawn term loan it took out in August 2023.
“This is opportunistic issuance to term out some of its short-dated floating-rate VMWare deal financing with fixed rate debt given the recent decline in interest rates,” said CreditSights on Thursday.
The term loan replaced the bridge loans that Broadcom had put in place for the acquisition of VMware when it was first announced in May 2022. The deal was completed in November 2023 after protracted regulatory approvals, and Broadcom has been biding its time.
In July 2024, Broadcom raised $5bn to pre-pay a portion of a $9.2bn term loan due in November 2025. As of August 4, the company had $19.2bn of floating rate term loans, with a $11.2bn tranche priced at 1.25bp over the secured overnight financing rate due in November 2026 and a $8bn tranche priced at 162bp over Sofr due in November 2028, according to a filing with the SEC.
Oracle prefers longer paper
Broadcom jumped into the market on the heels of Oracle Corp (Baa2/BBB), which raised $6.25bn on Wednesday to refinance near-term debt maturities.
The US cloud computing firm printed a $1.5bn five year at 70bp over Treasuries, a $1.75bn 10 year that came at 95bp, a $1.75bn 30 year at 125bp and a $1.25bn 40 year that ended at 138bp. Bank of America, Citi, Goldman Sachs, HSBC and JP Morgan were bookrunners.
Oracle’s preference for longer-dated paper reflected an increased bid at the long end following the Federal Reserve’s 50bp rate cut.
“The deeper cut to 50bp added more stimulant to the credit markets as the Fed is focused on keeping the US economy going and keeping it close to a soft landing," said one high grade source.
Analysts at Deutsche Bank said on Thursday that there was growing optimism about the economic outlook, particuarly after the Fed's rate cut last week.
“[Wednesday] brought fresh evidence that lower rates were already having a stimulative effect on the US housing market," they said. "So the hope is that given the lags of monetary policy, we’ll see further good news and data improvements over the coming months, especially as we’re now seeing a globally synchronised cycle of rate cuts.”
Manic Monday
Monday was the busiest day for supply in the dollar bond market, when five borrowers raised a combined $7.55bn.
Hyundai Capital America (A3/A-), the US funding arm of the Korean car firm, printed the biggest trade when it raised $2.75bn in a four-part senior unsecured offering.
It printed a $900m three year at 85bp over Treasuries, a $850m five year at 105bp, and a $500m seven year at 115bp. It also issued a $500m three year floater at 103bp over the secured overnight financing rate. BNP Paribas, CA-CIB, JP Morgan, Mizuho, MUFG and Royal Bank of Canada were bookrunners.
Meanwhile, Paccar Financial Corp (A1/A+) printed a $400m five year note at 55bp over Treasuries, with BNPP, ING, JP Morgan and Société Générale.
T-Mobile USA (Baa2/BBB+) raised $2.5bn across three tranches, including a $700m five year that came at 75bp over Treasuries, a $900m long 10 year at 98bp, and a $900 long 30 year note that ended at 118bp. JP Morgan, Morgan Stanley, RBC and Wells Fargo were bookrunners.
Simon Property Group (A3/A-), brought a $1bn 10 year note at 110bp over Treasuries, with BNPP, Citi, PNC and US Bancorp as bookrunners.
Lastly on Monday, Invitation Homes Operating Partnership (Baa2/BBB+) printed a $500m 10 year note at 128bp over Treasuries, with Deutsche Bank, Mizuho, PNC and Wells Fargo as bookrunners.
The following day, Norwegian oil exploration company Aker BP (Baa2/BBB) raised $1.5bn across two tranches — a $750m 10 year that was printed at 143bp over Treasuries and a $750m 30 year that ended at 173bp. Barclays, Citi, DNB, ING and Wells Fargo were bookrunners.
US chemicals manufacturer Huntsman International (Baa3/BBB) printed a $350m 10 year note at 200bp over Treasuries, via Bank of America, Citi and JP Morgan.