CVS is borrowing a near-record $40 billion to bankroll a deal that hasn’t even been approved

CVS Health plans to sell $40 billion of bonds in order to finance its massive $69 billion acquisition of Aetna.

The sale marks the biggest corporate debt financing in more than two years, and the third-largest in history. And it comes at a tough time for the investment-grade fixed-income market, which is off to its worst start to a year in decades.

CVS’ large bond offering will take place with interest rates still close to historical lows. That will soon change, however, as the Federal Reserve continues to tighten monetary policy. The prospect of higher rates explains why CVS decided to act now, with rates still relatively attractive.

All of the notes besides the 30-year bond being offered will include a special mandatory redemption clause, which will require CVS to withdraw the debt at 101 cents on the dollar if the Aetna deal doesn’t close by September 3, 2019, according to a Financial Times report.

It’s a calculated risk, considering the company’s acquisition of Aetna hasn’t yet received regulatory approval.

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Joe Ciolli
Mar. 6, 2018, 10:29 PM