Meta, Facebook’s parent company, set to raise $10 billion in bonds

facebook-parent Objective Platforms Inc is set to raise $10 billion in its first-ever bond issue on Thursday as it seeks to fund share buybacks and investments to revamp its business, according to two sources familiar with the deal.

The offering, which included bonds with maturities ranging from five to 40 years, received more than $30 billion in investor orders, the sources said. They added that demand was skewed towards longer-dated bonds.

Meta did not respond to a request for comment.

Of the big tech companies, Meta was the only one that had no debt on its books. Tapping into the market now would help him establish a more traditional balance sheet. This could give him more financial space as he tries to fund some expensive initiatives, like his metaverse virtual reality and short video product Reels, at a time when its cash is running out, the sources said.

The sources, who declined to be named as they were not authorized to speak publicly, said Meta had begun serious work on the offer over the past two months.

It decided to launch the offer after publishing its results in late July, they said. The different maturities of its offer would give it more financing options in the future, they added.

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A recent resurgence in corporate bond markets over the past month after a rout earlier this year amid interest rate uncertainty has given Meta a window to tap into the market now, the sources said. .

Hoping that the US Federal Reserve’s fight against inflation through aggressive rate hikes was starting to have some impact, investors rushed into the bond market.

This week was one of the busiest of the year, with blue-chip US companies raising nearly $60 billion in primary bond markets, according to data from Informa Global Markets.

Other tech giants such as Apple Inc and Intel Corp also issued bonds earlier this week, raising $5.5 billion and $6 billion, respectively.

Bankers and investors said such issuance windows could be fleeting and rare in the coming months. Credit spreads could widen later this year, increasing financing costs.

In late July, Meta issued a grim forecast and recorded its first-ever quarterly drop in revenue as recession fears and competitive pressures weighed on its digital ad sales.

Its free cash flow is drying up as it pursues its plans for the Metaverse – a transformational bet that led to the company changing its name to Meta last year.

In the second quarter ended June 30, Meta had $4.45 billion in free cash flow, up from $8.51 billion a year ago.

The company received an “A1” rating from Moody’s and an “AA-” rating and “stable” outlook from S&P.

Bank of America Merrill Lynch, Barclays, JPMorgan Chase and Morgan Stanley were co-bookrunners for the Meta bond offering.

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