Oracle To Sell Bond Worth $3.25 Billion in Private Placement

Oracle To Sell Two-Part Bond Deal Worth $3.25 Billion

New York (Dow Jones-Wall Street Journal)–Oracle Corp. said it would sell $3.25 billion worth of notes in a private-placement offering, the latest in a string of blockbuster bond sales that have come to dominate the investment-grade corporate debt market.

Debt issuance via the private placement has been slow of late but dominated by single issuers coming to market with multibillion-dollar, multi-tranche deals.

Time Warner priced a $3 billion, three-part deal on July 7, an issue that makes up more than a third of last week’s $8.9 billion high-grade issuance. Wal-Mart (WMT) priced $3 billion worth of bonds on June 30, making up nearly half of that week’s $6.06 billion in issuance.

Oracle’s debt issue is the largest U.S.-marketed bond sale since HSBC (HSBA.LN) sold $3.8 billion worth of notes on June 17, according to Dealogic. It’s the biggest nonfinancial deal since the NBC Universal division of General Electric Corp. (GE) sold $4 billion of bonds on April 27.

Oracle priced the private placement deal in two parts: the $1 billion, 10-year notes priced at a discount to yield 3.902%, or 0.85 percentage points over comparable Treasurys, and the 30-year, $2.25 billion piece priced at a discount to yield 5.454%, or 1.40 percentage points over comparable Treasurys.

While the software giant’s shelf registration offered little clue as to how Oracle would spend the money, the fund raising could indicate the company is stockpiling cash in case it wants to make a significant acquisition. Oracle has pursued an aggressive growth-through-acquisition strategy, buying big and small companies to add products and reach.

In January, Oracle closed its most recent significant transaction, a $7.4 billion purchase of Sun Microsystems. The deal marked the software company’s most significant foray into hardware and helped contribute $1.8 billion to Oracle’s fourth-quarter revenue of $9.5 billion.

Oracle last sold debt in the primary market on June 30, 2009, when it issued $4.5 billion in bonds, according to Dealogic. A part of that deal, $1.25 billion of 6.125% bonds maturing in July 2039, was the most actively traded issue on the secondary market Monday. The spread, or risk premium, widened by 0.17 percentage point, to 1.23 percentage points over comparable Treasurys, according to MarketAxess.

Fitch Ratings, which has assigned an A rating to Oracle’s notes, said the offering would be used primarily to refinance nearly $1 billion in commercial paper and to fund $2.25 billion in 5% senior notes due in January 2011.

A query to Oracle regarding the debt issue was not returned.

The deal is being run through joint bookrunners Bank of America Merrill Lynch, BNP Paribas and J.P. Morgan and is expected to price today.

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