The deal to help fund the US$110bn takeover of SABMiller was the second-biggest investment-grade bond ever priced, and it was executed with poise, good timing and confidence.
“InBev redefined the playbook for acquisition finance,” said Marc Fratepietro, co-head of global debt capital markets at Deutsche Bank, which led the deal along with Bank of America Merrill Lynch and Barclays.
“The company got orders from investors in over 45 different countries, and there was no controversy after this deal. It was the optimal size – it didn’t trade up hugely and it has rallied since.”
But the deal’s success was by no means a given back in January when oil prices were slumping and the Dow Jones index was off to one of its worst starts to a calendar year.
Market sentiment was dampened by worries about China in particular and the global economy broadly.
In addition, some worried that bond investors might be in the mood for a long winter’s nap after digesting a record US$1.29trn of issuance in 2015.
Those worries proved unfounded as the buyside bellied up to the bar with US$110bn of demand – the largest order book for a corporate bond ever recorded.
The extraordinary demand allowed leads to ratchet in pricing from initial thoughts by 15bp–35bp across the tranches by launch.
That significantly lowered the funding costs for AB InBev (A3/A–), which would use the proceeds to help take out a US$75bn syndicated loan financing the SABMiller purchase.
The company – maker of brands such as Budweiser and Beck’s – was judged to have paid new issue concessions ranging from negative 5bp to plus 20bp across the deal’s seven tranches.
About US$28bn of the deal was dated 10 years and longer, bucking the trend at the time for shorter maturities.
Tenors of 20 and 30 years – each sized at about US$11bn – found buyers thirsty for yield in a desert of meagre returns.
And unlike other attractive deals that generated gripes about distribution, allocations went smoothly. Mitsubishi UFJ, Santander and Societe Generale were joint books on the deal.
In the end, the company – itself the product of several mega-mergers – sold an outstanding bond to fund its latest expansion and was able to capitalise on its strong track record.
“The management team have delivered time and again on deleveraging targets in prior acquisitions,” a banker close to the deal said at the time.