Jury's ruling against Bayer sends bonds wide

2 min read
EMEA
William Hoffman

Bayer bonds broke wide Wednesday after a jury determined on Tuesday that the company’s popular outdoor weedkiller brand Roundup was a “substantial factor” in one customer’s cancer diagnosis.

The verdict is expected to be appealed after the court determines a penalty for damages in the coming weeks.

The verdict, however, marks a notable loss for the company that was expected to have an easier path to victory in this case as compared with the more than 9,300 lawsuits filed against it, according to CreditSights.

Bayer’s 4.875% 2048 issuance was among the most traded early Wednesday moving as high as 236bp over Treasuries, up from Treasuries plus 210bp the day prior, according to MarketAxess data.

The company’s 4.375% 2028 bond also cut wide by as much as 22bp to trade at 206bp over Treasuries at its height.

CreditSights notes that this is still the early innings of a long litigation battle, which has yet to determine claims that Bayer’s subsidiary Monsanto knew that the chemical glyphosate was dangerous and that it further attempted to hide that knowledge from the public.

This is the second unexpected court loss for the German chemicals company since an August verdict awarded to terminally ill Dewayne Johnson, who was diagnosed with non-Hodgkin’s lymphoma through his use of the spray as a groundskeeper for two years.

Johnson’s jury initially awarded him US$289m, but a court mandate later reduced it to US$78m later that month, according to Reuters. Bayer said it would appeal the ruling.

Prior to that trial’s conclusion, Bayer’s 2048 was trading as low as 158bp over Treasuries and in the subsequent month broke out as high as 198bp over, according to MarketAxess data.

Bayer levered up with a US$15bn bond issuance in June 2018 to fund in part its US$62.5bn acquisition of US-competitor Monsanto.

Adjusted net leverage at the chemical company stands at 3.2 times, but the company continues to emphasize its deleveraging plan to get back to a Single A rating, according to CreditSights.

That deleveraging plan includes several asset sales including popular consumer health brands Coppertone and Dr. Schools, as well as its animal health business, which is expected to fetch some €5.5bn.

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