Oracle leads US corporate bonds sale surge

Amgen and Oracle led a US corporate bond sales charge on Tuesday, raising $13.5bn to buy back shares as the market for company debt heated up again after the traditional earning season blackout period.

Oracle reported earnings in March but saw its credit rating upgraded by one notch to AA- by Standard & Poor's earlier this month, and decided to push the button on a large $10bn six-part bond sale this week, offering maturities ranging from seven years to four decades.

The technology company led by Larry Ellison said in a regulatory filing that the use of the proceeds "may include stock repurchases, payment of cash dividends on our common stock and future acquisitions". The deal is the fourth biggest this year, after significant bond sales from Actavis, AT&T and Microsoft earlier in 2015.

Amgen raised $3.5bn through the sale of bonds maturing in five, seven, 10 and 30 years. In addition to reducing some of its bank loans, the drugs group also said it planned to use the money raised to buy back shares.

US share buybacks and dividends are forecast to hit $1tn this year, as companies continue to eschew investments in favour of returning money to shareholders.

Much of the money has come from cash reserves bloated by fatter profit margins thanks to cost-cutting, but many companies have turned to bond markets to raise money for equity investors.

<

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.

Issuance slows down in earnings season due to the mandatory information blackout period but now that most companies in the S&P 500 have finished reporting their latest results bond sales are expected to jump again.

"It's very normal," said Ryan Preclaw, a strategist at Barclays. "Companies often tail off issuance even before the earnings blackout and then there's a big rush afterwards . . . The first quarter was the best ever for gross supply, and demand is very robust."

This represents the best start to a year on record for both investment grade and junk-rated corporate debt sales, according to Dealogic, with $247.9bn of blue-chip bonds being sold and $132.2bn of high yield debt so far in 2015.

Jonny Fine, head of US investment grade debt syndicate at Goldman Sachs, highlighted that a bigger proportion of bond sale volumes has been "jumbo" deals.

"Whether M&A related, share repurchase related or corporate finance related, there is a need for larger bites of funding," he said. "Large, liquid, jumbo, benchmark deals from large-cap, liquid, easy-to-follow credits are very much in the wheelhouse of corporate bond investors today."

The issuance splurge has not caused any indigestion yet. US corporate bonds have returned 2.7 per cent already this year, and the average yield stands at just 2.88 per cent.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation