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Meta Platforms Inc. is selling bonds in the U.S. investment-grade primary market Wednesday as borrowers rush to raise cash after volatility earlier this week halted debt sales.
The Facebook and Instagram parent company is selling bonds in as many as five parts for general corporate purposes, according to a person with knowledge of the matter. The longest portion of the offering, a 40-year security, may yield 1.55 percentage points above Treasuries, said the person, who asked not to be identified as the details are private.
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“Meta’s sale is a sign that their investment in AI is not slowing down and is likely to increase over the next couple of years,” Robert Schiffman, a Bloomberg Intelligence analyst, said in a phone interview. “Meta has an ample amount of cash, but it’s a more efficient use of capital to borrow money in the bond market”
There are 17 companies that intend to sell bonds on Wednesday as blue-chip firms ease back into primary markets after Monday’s volatility halted deals. Risk premiums tightened five basis points on Tuesday, making funding more attractive. Prior to the selloff, the calendar had been expected to be fairly robust this week, with dealers originally calling for around US$40 billion.
The debt raise follows the company’s better-than-expected sales report for the second quarter on Wednesday, signalling that the company’s investments in artificial intelligence are helping it sell more targeted ads. Shares ended the week higher, snapping a three-week losing streak.
Meta has been spending heavily on data centers and computing power as chief executive Mark Zuckerberg works to build a leading position in the industry-wide AI race. The company changed its full-year projections for capital expenditures, setting a new forecast of US$37 billion to US$40 billion, raising the low end of an earlier range by US$2 billion. A representative for Meta didn’t immediately respond to a request for comment.
“The name has been under levered and they have been talking about raising their debt levels,” Schiffman said. But “this gives them flexibility,” he added. “They can keep investing in AI and the metaverse.”
Only US$6.77 billion of new deals were sold on Tuesday, likely building a pipeline of several issuers. Those firms are capitalizing on a favorable borrowing environment, with the average high-grade yield at 5.06 per cent.
With assistance from Kurt Wagner
Bloomberg.com
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