As reported by Bloomberg, Actavis with the aim of financing its deal to acquire Allergan Inc. will issue one of the largest corporate deals in terms of debt.
According to an unknown source close to the transaction, the pharmaceutical company's securities will be issued immediately on Tuesday. Earlier last month, Actavis said the company has planned to obtain up to $22 billion, which would be one of the biggest sales of bonds after that of Verizon Communications Inc of $49 billion in the year 2013.
In a statement, the drug maker company said that the amount raised by issuing securities will be used to put a full stop on Allergan purchase in coming November, for almost $65 billion. This was the largest pharmaceutical deal announced last year, in order to enter into world's top ten biggest firms in pharma industry. The Ireland based company is also offering shares to raise additional $8.4 billion and will take term loan for remaining amount in order to finance its deal, as reported in 19th February regulatory filing
Portland a leader capital corporation money manager, Mr. Scott Carmack said, "If you are an investment-grade company, with rates so low and central bank forces still so strong, you can still get what you want in this market as investors are hungry for yield on a global scale". He further said, "Actavis is issuing a lot of paper, but the market should be able to handle it easily."
According to a person close to the matter, the deal contains bonds having a maturity period of 30 years carrying a yield of 2.4% that is more than any other bond with same maturity period. The deal also contains 10 years debt having yield of 2%, which is above the benchmark set by government. During the last year the drug maker company share has increased by 28%, twice as much in S&P 500 index.
Expert's said it would be much easier for the drug maker to obtain debt because of the increasing demand in the market. The investors are seeking to invest money in potential firms like Actavis. However, United States lower rate of interest favors selling of bonds.
Various other companies like Apple Inc. have also raised debt financing , regardless of having enormous amount of cash at bank. Apple have almost $180 billion cash, but it finance its operations through debt as it is less expensive than sending money back home which it have in offshore accounts.