BEER SELLS IN ALL MARKETS: ABIBB $46BLN – SEVEN TRANCHE DEBT DEAL

In the midst of today’s maelstrom, Anheuser-Busch InBev SA/NV (bond ticker ABIBB) launched the 2nd largest corporate bond deal ever. Proceeds are to assist with the formerly announced SAB Miller acquisition. From initial sizing talk of $30bln, they printed $46bln across 7 maturities with an order book in excess of $110bln:

3 year fixed, $4bln at T+85 (US Treasuries +85bp). 5 year fixed, $7.5bln at T+120. 5 year FRN, $7.5bln at 3mth L+126 (Libor +126). 7 year, $6bln at T+150. 10 year, $11bln at T+160. 20 year, $6bln at T+190 & 30 years, $11bln at T+205.

The bonds were trading 5-10bp tighter across all maturities in the gray market late pm NY time. As they say, feed the ducks when they are quacking! There is no convenient lay-away plans for bonds. There will be a liquid repo market in the various tranches of this bond deal given the size for accounts that want to impart leverage, but the bulk of the buyers will be cash buyers.  Assets had to be sold to make room for this giant high grade (ABIBB is single A rated) bond issue. A portion of the sales effected were equities and an asset allocation shift of this magnitude may be behind some of the equity market downdraft evident on the day.

The North American high grade CDX Index (125 equal weighted credit default swaps on investment grade entities) widened 4bps to close at 102.8bp today. This is the first close above 100bp since 2012. JCG

Note: The largest ever bond issue, $49bln, was launched in Sept. 2013 by Verizon (8 tranche deal). VZ printed off a smaller order book of $101bln.