Merck Sells $2 Billion of Bonds After Upgrade by S&P
Stock Chart for Merck & Co Inc (MRK)
Merck & Co., the second-largest U.S. drugmaker, sold $2 billion of senior unsecured bonds to repay debt coming due next year, an offering that came within two weeks of Standard & Poor’s raising its rating on the company.
Bank of America Corp. and JPMorgan Chase & Co. managed the transaction, which included $850 million of 5-year notes and $1.15 billion of 10-year debt, according to data compiled by Bloomberg.
S&P raised the drugmaker’s rating one level to AA on Nov. 24, citing Merck’s faster-than-expected debt reduction after buying Schering-Plough Corp. last year. Proceeds will be used for general corporate purposes, including cutting short-term debt, Whitehouse Station, New Jersey-based Merck said in the filing.
“Merck probably isn’t going to save a lot in interest expense by refinancing its short-term debt, but it’s still a good idea to address those maturities now while the bond market continues to be welcoming,” said Carol Levenson, director of research at Gimme Credit LLC in Chicago, said in an e-mail.
“Taking advantage of the recent upgrade is also a good idea,” she said.
The 5-year, 2.25 percent notes yield 57 basis points more than similar-maturity Treasuries, and the 10-year, 3.875 percent debt pays a spread of about 77 basis points, Bloomberg data show. A basis point is 0.01 percentage point.
Moody’s Investors Service assigned Merck’s notes a grade of A1, one step lower than S&P. Merck benefits from “a relatively high standing in credit markets, with ready access to capital,” S&P said in its Nov. 24 statement.
The pharmaceuticals maker had $4.1 billion of debt due in the 12 months ending Sept. 30, 2011, it said in today’s filing.
Merck last sold bonds in June 2009, when it raised $4.25 billion in a four-part offering, its largest ever, to help pay for the Schering-Plough takeover, according to data compiled by Bloomberg.
Pfizer Inc., based in New York, is the world’s largest drugmaker.
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