UnitedHealth garners US$24.6bn book for US$5.5bn bond

Credit: REUTERS/BRENDAN MCDERMID

UnitedHealth Group priced on Tuesday a US$5.5bn five-part bond, which is intended to repay commercial paper that was incurred through recent bolt-on acquisitions.

By William Hoffman

NEW YORK, July 23 (IFR) - UnitedHealth Group priced on Tuesday a US$5.5bn five-part bond, which is intended to repay commercial paper that was incurred through recent bolt-on acquisitions.

UnitedHealth recently beat second quarter earnings expectations and closed two bolt-on M&A deals for payment processing company Equian for US$3.2bn and Kidney disease care provider Davita for US$4.3bn.

The acquisitions increased its commercial borrowings to US$7.8bn in the second quarter, US$3.65bn of which are due through 2020, according to CreditSights.

Pricing on the notes tightened 20bp-25bp from initial thoughts after the deal garnered a final order book of US$24.6bn.

The US$750m five-year, US$1bn 10-year, US$1.25bn 20-year, US$1.25bn 30-year and US$1.25bn 40-year notes priced at Treasuries plus 55bp, 80bp, 95bp, 110bp and 130bp, respectively.

Healthcare and pharmaceuticals are under pressure this year due to sizeable acquisitions in the space such as Bristol-Myers Squibb's record US$74bn purchase of Celgene that was funded through a US$19bn bond in May.

UnitedHealth has been able to stay out of the larger M&A discussions, but the risk of the company making a splashy deal is ever-present, CreditSights noted.

UnitedHealth (A3/A+/A-) has one of the strongest credit profiles across health, life and P&C insurance, and new issue concessions are likely to be erased through price progression on today's bond, CreditSights said.

Other names in the sector such as Anthem may provide a better spread pickup, the research firm said.

But the sector has faced other political headwinds such as volatility from US presidential candidates proposing the elimination of private healthcare and failed bipartisan proposals to lower consumer drug costs.

(Reporting by William Hoffman; Editing by Paul Kilby)

((william.hoffman@thomsonreuters.com; 646 223 6141;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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