HG bonds: Broadcom places $10B offering to repay debt; terms

Broadcom Inc. today completed a $10 billion, five-part offering to repay certain existing indebtedness, following up on a brace of large refinancing-driven deals it printed during the pandemic period last year.

Proceeds of today's placement will be used to repay existing debt, including the funding of a concurrent tender offer for notes maturing between 2021 and 2023, according to the company. Broadcom said the aggregate purchase amount under the tender was up to $2.75 billion, though it retained the option to increase the amount based on the proceeds it receives from the sale of the new notes.

Broadcom tapped the U.S. bond market twice last year, for a total of $12.5 billion in issuance. In April, it completed a $4.5 billion, two-part offering evenly split across 4.7% five-year notes due April 2025 at T+425 and 5.0% 10-year notes due April 2030 at T+437.5. For reference, the 2030 issue traded today at a G-spread between 145-153 basis points, according to MarketAxess.

In May, the company printed an $8 billion, four-part offering across 2.25% notes due Nov. 15, 2023, at T+200; 3.15% notes due Nov. 15, 2025, at T+280; 4.15% notes due Nov. 15, 2030, at T+350; and 4.3% notes due Nov. 15, 2032, at T+365. The 2032 issue changed hands earlier today at a G-spread between 152-160 bps, trade data show.

The San Jose, Calif.-based semiconductor company's ratings profile includes stable outlooks all around.

Earlier today, the rating agencies assigned respective BBB-/Baa3/BBB- ratings to the new offering.

S&P Global Ratings noted today that its BBB- rating and outlook remain unchanged, reflecting expectations for the company to generate "consistent EBITDA and cash flow through an increasing share of recurring enterprise software sales and a leading position in semiconductor products deployed in connectivity and storage infrastructure." It views the company's intermediate leverage and its "aggressively acquisitive growth strategy" as key risks.

"The stable outlook reflects our expectation that Broadcom will maintain leverage under 3.5x through peaks following acquisitions and during cyclical downturns. Although we believe Broadcom could further reduce leverage levels, we expect management will remain highly acquisitive and believe sustained leverage of less than 2.5x is unlikely," Ratings stated.

Moody's noted that since the proceeds will be used for refinancing purposes, the offering will be leverage neutral and would "modestly" improve Broadcom's liquidity profile. However, like S&P Global Ratings, Moody's cited Broadcom's M&A cadence and cyclical business as credit headwinds given relatively high 2020 leverage.

Of note, in September, Fitch revised the outlook to stable, from negative on its BBB- rating, citing an increased proportion of higher-margin recurring revenue from software assets. "Overall, organic revenue should remain positive through the forecast period with modest contributions from acquisitions, more likely in fragmented infrastructure software markets," Fitch said today. Terms: