Eastman Chemical Sells $2.4 Billion Bonds to Buy Solutia

Eastman Chemical Co. sold $2.4 billion of debt in three parts to fund its acquisition of Solutia Inc.

The company issued $1 billion of 2.4 percent five-year notes that yielded 170 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. Its $900 million of 3.6 percent, 10-year securities yielded 195 basis points more than benchmarks, and its $500 million of 4.8 percent, 30-year debentures had a 200 basis-point spread, the data show.

The fibers and plastics firm said in a regulatory filing today that it will use proceeds from the sale for its acquisition of Solutia, which it agreed in January to buy for about $4.7 billion, including assumed debt. Eastman sold bonds after United Technologies Corp. raised $9.8 billion of debt last week in the biggest U.S. deal since 2009. Yields on investment-grade securities at 3.48 percent are within 15 basis points of the lowest level reached on the Bank of America Merrill Lynch U.S. Corporate Master Index.

“It’s been widely known for some time that they were issuing this debt,” Cynthia Werneth, an analyst at Standard & Poor’s said in a telephone interview. “Getting it buttoned down is a favorable thing for them.”

The biggest U.S. producer of chemicals from coal got a $1.2 billion, five-year term loan in February to fund a part of the Solutia purchase, according to a May 10 regulatory filing. “The acquisition improves the business as they are buying a stable, high-margin company,” Werneth said.

The Kingsport, Tennessee-based company is rated two levels above speculative grade at Baa2 by Moody’s Investors Service and an equivalent BBB by S&P. Eastman had the capacity to add debt to facilitate the deal, according to Werneth. “Prior to the acquisition they were financially strong for their rating,” she said.

The debt sale was managed by Barclays Plc, Citigroup Inc. and JPMorgan Chase & Co., according to today’s regulatory filing.

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