Broadcom Sells $5 Billion of Bonds to Refinance VMWare Loan

(Bloomberg) — Broadcom Inc. is borrowing $5 billion in the US investment-grade bond market on Monday, to refinance a portion of the loans it secured to pay for its $69 billion acquisition of VMware Inc.

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The software developer is selling debt in three parts, according to a person with knowledge of the matter. The longest tranche will yield 0.95 percentage point over Treasuries, said the person, who asked not to be identified, after initial talks in the area of 1.25 percentage point above Treasuries.

Representatives for Broadcom declined to comment.

The planned debt sale comes more than seven months after Broadcom closed its acquisition of VMware. It also comes nearly a year after the company secured up to $28.4 billion in new debt commitments to fund its purchase and replace a shorter-term loan it had snagged while waiting for regulatory approvals.

The committed financing was split into three parts: a $10.7 billion A-2 facility, $10.7 billion A-3 facility and a $7 billion A-5 facility, according to an August filing. Broadcom will use the proceeds from the sale to prepay a portion of the term A-2 loans under its term loan credit agreement and for general corporate purposes, leaving at least $23.4 billion of debt that will still need refinancing.

The company is likely issuing now to “mildly extend its duration profile,” while providing the capacity to keep deleveraging over the intermediate-term, Bloomberg Intelligence senior credit analyst Robert Schiffman wrote in a Monday note. Issuers have also been taking advantage of lower funding costs recently as risk premiums stick near historic tights and yields continue to fall.

Bank of America Corp., BNP Paribas SA and HSBC Holdings Plc are leading the bond sale, said the person.

Broadcom’s initial $32 billion bridge loan in 2022 to help fund its VMware acquisition was the largest M&A funding package seen in over a year. Before that, banks had committed $41.5 billion for AT&T Inc.’s spinoff and merger of its media business with Discovery Inc.

(Updates to include pricing details starting in the headline.)

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