Today Larry Ellison’s Oracle Corp announced it is launching an offering of US$10 billion of new corporate bonds, in order to help fill the company’s treasury and also, in part, to help pay for its recently announced US$5.3 billion acquisition of MICROS Systems Inc. which is expected to close later in the year.
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Issued in a number of layered tranches offering differing terms to maturity, altogether this new Oracle debt offering ranks as the second largest such corporate bond offering so far in 2014. Companies generally like to issue their bonds in several layers to avoid inconvenient bunching of matures when they eventually fall due, which could potentially happen at a difficult time in the capital markets and make refinancing more difficult or more expensive.
With this offering Oracle is deploying no less than seven separate maturity layers, from as little as three years all the way out to 30 years. Pricing is pretty keen too, and for the ten year notes as an example Oracle are paying just 90 basis points more than equivalent maturity US Treasuries.
When Apple issued US$12 billion of its own new bonds two months ago these were priced at just 77 basis points over US treasuries for the same ten year tranche, so both companies are doing well in commanding good prices for their debt. With continued low inflation, fixed rate bond pricing is very attractive to companies seeking to lock in these historically attractive rates.
At the short end of the maturities the new Oracle issue included two floating rate note offerings, with US$1 billion of three-year money and US$$750 million of five-year money, due in 2017 and 2019 respectively.
The 2017 three year floating rate notes will bear interest at 90 day LIBOR plus 0.20% p.a. and the 2019 five year floating rate notes will bear interest at 90 LIBOR plus 0.51% p.a.
In the medium maturities Oracle has offered US$2 billion of 2.25% fixed rate five year money due in 2019, US$1.5 billion of 2.8% fixed rate seven year money due in 2021 and $2 billion of 3.4% fixed rate ten year notes due in 2024.
Finally at the long end of the maturity spectrum Oracle is issuing US$ 1.75 billion of 4.3% fixed rate 20 year notes due in 2034 and US$1 billion of 4.5% fixed rate 30 year notes due in 2044.
Oracle expects to use the money for its general corporate purposes, potentially including stock repurchases, payment of cash dividends on its common stock, future acquisitions, including payment for its pending acquisition of MICROS Systems, Inc., and refinancing of some of the company’s existing indebtedness, including repayment of US$1.5 billion outstanding existing senior notes which come due this month.
The offering is being made by way of prospectus through an underwriting syndicate led by Merrill Lynch, J.P. Morgan and Wells Fargo Securities.