Record bond issue by Roche raises $16 billion

Roche has sold $16 billion in a six-part bond issue in the USA to help finance its $42 billion hostile bid for the 44% stake in Genentech it does not already own.

The transaction, reported to be the largest US dollar-denominated corporate bond sale in history, was expected to raise some $10 billion but observers say that the issue was heavily oversubscribed. The sale comprised two floating-rate notes that mature between one and two years, and four fixed-rate tranches, with maturities from three to 30 years.

The huge deal shows that investors are still extremely keen to buy debt in high-quality firms and Roche fits the bill on that score. The Swiss major is rated AA- by Standard & Poor's and Aa1 by Moody's Investors Service.

Roche had previously said it plans to use a combination of its own funds, bonds, a commercial paper programme (for as much as $10 billion) and bank financing for the Genentech deal. After the USA sale, the firm is now expected to sell bonds in European debt markets.

Meantime, Roche chief financial officer Erich Hunziker has told US investors that the company will cut back on spending after the potential Genentech purchase. Speaking on a conference call, and reported by Bloomberg, he said that “you would only see minor acquisitions in the $50-$60 million range and definitely nothing which will be in the billions”. He added that the Genentech deal “will be a constraint for the next two to three years”.