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(Bloomberg) — British defense company BAE Systems is asking investors for a potential bond sale of more than $4 billion to help refinance the bridge loan it used to acquire Ball Aerospace. This was revealed by a person involved.
The company agreed to buy Ball Aerospace Corp. in August for $5.6 billion as a way to reach space, a frontier the company predicts will become increasingly important in warfare. This was the largest acquisition in the company’s history. The final bond issue amount will be determined on the date of sale.
The bond sale will refinance a $4 billion loan facility the company underwrote in August. This is the latest in a number of deals planned to finance mergers and acquisitions after the worst year for acquisition financing in a decade.
BAE Systems and Bank of America, which coordinated investors’ calls for a sale on Monday, did not immediately respond to requests for comment.
Borrowers are flooding into the corporate bond market at the fastest pace in history to lock in financing amid tight spreads, keeping all-in borrowing costs low. Companies such as Bristol-Myers Squibb, Cisco Systems, and AbbVie have been successful in attracting large orders for products related to mergers and acquisitions.
Read more: Bond markets are flooded with M&A financing deals: Credit Weekly
The selloff has extended this week ahead of the Federal Reserve’s interest rate decision on Wednesday, potentially slowing the flow of new bond issuance. Eight borrowers entered the bond market on Monday, with $25 billion to $30 billion expected to be issued this week.
Moody’s Ratings upgraded BAE Systems’ credit rating from Baa2 to 3 speculative at the end of February, citing strong growth prospects and expectations that the company will once again strengthen its credit ratios following a largely debt-financed acquisition. The rating was raised to Baa1, a step higher.
–With assistance from Brian Smith.
See more articles like this at bloomberg.com
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