Occidental Petroleum bond order book hits $75 billion

Bloomberg

Occidental Petroleum Corp. has received over $75 billion in orders for its bond sale to help finance its acquisition of Anadarko Petroleum Corp., according to people familiar with the matter.
It’s the biggest demand for a debt deal since Saudi Arabia’s Aramco received more than $100 billion in orders in April and a sign that investors are willing to take risk again just a day after the trade-war induced volatility shook global markets.
Occidental is selling bonds to fund the $38 billion takeover in as many as 10 parts, a person with knowledge of the deal said. The longest portion of the offering, a 30-year security, may yield around 2.7 percentage points more than Treasuries, said the person, who asked not to be identified.
Four other investment-grade borrowers are marketing debt deals today as issuers regained their confidence after the latest flareup in the US-China trade war brought sales to a near halt on Monday. High-grade credit spreads jumped 6 basis points on Monday, the biggest single-day widening relative to risk premiums since June 2016’s UK Brexit decision.
The Occidental bond sale, expected to be in the $11 billion to $13 billion range, comes after the Houston-based company won the battle for Anadarko assets. Chevron Corp. elected not to sweeten its $33 billion offer for Anadarko, walking away with a $1 billion breakup fee in May.
Activist investor Carl Icahn recently criticised Occidental for agreeing to take on a $10 billion investment from billionaire Warren Buffett in order to increase the cash portion of its bid.

The company has also agreed to sell Anadarko assets in four African countries to France’s Total SA for $8.8 billion, as part of a $10 billion to $15 billion divestment plan to help it pay down debt. Occidental is seeking a buyer to take majority control of Western Midstream Partners LP, the pipeline operator that it’s poised to inherit through the Anadarko takeover, people familiar with the matter said in June.

The acquisition, the largest seen in the oil and gas industry since Royal Dutch Shell Plc acquired BG Group Ltd. in 2016, adds over $40 billion of debt to Occidental’s capital structure, according to Moody’s Investors Service. That’s a significant increase that leaves the company “with less flexibility to confront commodity price volatility,” Andrew Brooks, Moody’s analyst, wrote in a statement last week. The rating company downgraded Occidental’s senior unsecured rating three notches to Baa3.

Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. are managing the bond sale, the person said.