AstraZeneca Issues $6.9 Billion in Bonds, Plans Euro Deal


Drugmaker AstraZeneca said on Thursday it had seen strong demand for $6.9 billion of bonds it issued to repay a significant part of the U.S. commercial paper taken on for the acquisition of biotechnology company Medimmune.

The deal, like the recent $40 billion loan syndication for Rio Tinto, further proof that funding is still available in large amounts for top-rated corporate borrowers, despite the turmoil in the credit markets that has led to a string of bond and loan issues being postponed.

On Thursday, the company named Citigroup, Deutsche Bank and HSBC to arrange meetings with euro bond investors, for a potential euro bond issue.

The dollar bond sale was split into four parts, with a two-year floating-rate note and three fixed-rate tranches maturing in five, 10 and 30 years, AstraZeneca said in a statement.

"We are delighted by the investor reception for AstraZeneca in the bond markets," Chief Executive David Brennan said in the statement.

AstraZeneca Group Treasurer John Cole told Reuters in an interview that conditions for the issue had been favorable and that the company had continued to access the U.S. commercial paper market despite the credit turmoil.

"It went extremely well, we were oversubscribed in all tranches," Cole said. "We thought we achieved very competitive pricing."

"What we were seeing was that quality issuers were actually getting issues away successfully," he said. "We actually felt it was good to go and were conscious there may well be a backlog of issuers as well."

Commercial Paper

Short-term funding has come into sharp focus in recent weeks as some borrowers, such as bank conduits and other specialized debt vehicles, have found it either impossible or too expensive to issue commercial paper.

"We've had no difficulty continuing to tap the U.S. commercial paper market and indeed are still doing so," Cole said. "Clearly one cannot fund long-term solely in commercial paper, so it was always our intention to take out long-term debt."

"We've continued to have access (to CP) at good sub-Libor rates. We've obviously got a strong credit rating, our long- and short-term ratings have both now been confirmed by Moody's and S&P. We've got those where we want them," Cole said.

AstraZeneca is rated A1 by Moody's Investors Service and AA- by Standard & Poor's, respectively the fifth- and fourth-highest ratings on the investment-grade scale.

The issuance however weighed on credit default swaps on AstraZeneca's debt, which widened 8 basis points to 33 basis points, according to Deutsche Bank prices.

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