Investors flock to Occidental jumbo-bond sale

Occidental Petroleum is set to raise $13 billion (€11.6 billion) through the US bond market on Tuesday to fund its takeover of Anadarko, an acquisition that has pitted famed investors Warren Buffett and Carl Icahn against one another.

Order book for the 10-part bond sale stood at $78 billion (€69 billion) by midday Tuesday in New York, according to two people briefed on the matter.

The strong appetite for the offering underscored investors’ renewed interest in corporate debt amid the ongoing global bond rally which has pushed yields across major government bonds sharply lower. The demand has allowed underwriters to tighten prices on the offering – whose maturity range from 18 months to 30 years – from initial guidance.

Debt

The 10-year bond was set to price with a yield of 195 basis points above comparably maturing US treasury bonds, down from the initial guidance of 220 bps.

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This would peg yield at about 3.68 per cent. This compares to Occidental's current outstanding debt that matures in 2027, which yielded 3.23 per cent as of midday on Tuesday, while effective yield on the ICE Bank of America index of investment grade energy debt was 3.47 per cent for bonds with a 10-year maturity.

The more favourable pricing comes even after Moody’s, the rating agency, last week downgraded Occidental’s credit rating to Baa3, the lowest investment grade level.

– Copyright The Financial Times Limited 2019