Strong demand for Visa’s $16bn bond deal

Visa raised $16bn in the year’s fourth-largest corporate bond offering as a record wave of mergers and acquisitions drives debt issuance in the US.

The deal, which will be used to pay for the US payment processor’s Euro 21.2bn acquisition of its former European subsidiary, lands days before the Federal Reserve is expected to tighten US monetary policy, a move that may gradually lift the costs of tapping debt markets

The six-tranche sale with maturities stretching out as far as December 2045 attracted roughly $45bn in demand from investors, according to a person familiar with the matter.

Visa priced $4bn in 10-year bonds with a yield to maturity of 3.193 per cent — roughly 93 basis points above comparable Treasuries — and $3.5bn worth of 30-year bonds with a yield of 4.31 per cent. By contrast, the 30-year benchmark Treasury traded just below 3 per cent on Wednesday.

The issue attracted strong demand across the yield curve, with underwriters tightening spreads on all six parts from initial guidance early in the trading day. Visa did not count any long-term debt on its balance sheet ahead of the sale on Wednesday.

Bank of America Merrill Lynch, Goldman Sachs, JPMorgan, US Bancorp and Wells Fargo acted as active joint book runners on the transaction.

The offering is the year’s 15th US marketed deal of at least $10bn, according to data from Dealogic.

Just three deals touched or surpassed that level in each of 2014 and 2013, according to S&P LCD, with only one reaching that threshold in 2012.

The bulk of the jumbo debt hauls have been used to finance takeovers as executives across corporate America seek out faster-growing business ventures — a response to the lacklustre economic expansion and the headwind of a stronger dollar.

Companies in the US have raised more than $325bn to fund acquisitions since the year’s start; four-fifths ahead of the record pace set in 2012 Dealogic data show.

“M&A financing has been a large part of the reason we have achieved these record-breaking supply numbers,” Dan Mead, a managing director on Bank of America Merrill Lynch’s investment grade syndicate, said. “The demand for those deals has been robust and speaks volumes to the ability to price a $16bn transaction this late in the year.”