Facebook parent Meta raises $10.5 billion in bond deal as borrowers tentatively return to market

By Ciara Linnane

Monday's stock market rout and Treasury rally kept issuers on the sidelines

Meta Platforms Inc. priced a 5-part investment-grade bond offering on Wednesday that includes a 40-year maturity, taking advantage of the better tone in the markets after the recent meltdown.

The Facebook parent (META) was one of a crop of issuers tapping the corporate bond market, according to Informa Global Markets, and raised $10.5 billion.

The corporate bond market saw no debt issuance during Monday's market carnage sparked by U.S. recession fears and the violent unwinding of the yen "carry trade."

The accompanying rally in Treasurys has also sent yields to levels that make borrowing more affordable. The benchmark 10-year Treasury yield BX:TMUBMUSD10Y was at 3.95% on Wednesday, two days after it fell a dramatic 50 basis points (0.50 percentage points) over only eight trading days, according to Dow Jones Market data.

Read also: Bond investors are coping with recession anxiety, extreme volatility

Proceeds of the Meta deal will be used for general corporate purposes, the company said in a regulatory filing. BofA Securities, JPMorgan, Morgan Stanley and Citigroup were underwriters.

Meta's existing bonds have seen net buying over the last 24 hours and the last two weeks, including during Monday's brutal rout of big tech.

The so-called Magnificent Seven group - Apple Inc. (AAPL), Meta, Alphabet Inc. (GOOGL), Nvidia Corp. (NVDA), Microsoft Corp. (MSFT), Amazon.com Inc. (AMZN) and Tesla Inc. (TSLA) - suffered a combined loss of market capitalization of $650 billion that day. It could have been worse - at their worst levels, the group was on track to lose $1.43 trillion.

Meta is the highest yielder of the group, as the following chart from data solutions provider BondCliQ Media Services shows. Just six of the seven names have outstanding bonds. Tesla has issued convertible bonds in the past, but they have since been converted to equity.

Meta's 3.85% notes that mature in August of 2032 are currently yielding 4.64%, putting them ahead of Amazon's 3.60% notes that mature in April of 2032, which are yielding 4.50%.

Meta's longer-dated 5.60% notes that mature in May of 2053 are yielding 5.30%.

Meta's bonds are rated AA3/AA- by Moody's Ratings and S&P Global Ratings, the fourth rung of the investment-grade scale. The company issued five-year, seven-year, 10-year, 30-year and 40-year bonds.

All five tranches priced at tighter yield spreads than initial price talk had suggested.

The company offered $1 billion of 4.30% notes that mature in August of 2029 at a yield spread of 55 basis points over yields on Treasurys with similar maturities, according to Informa. Spread is the premium investors expect for taking on the higher risk of corporate bonds. That was tighter than the initial price talk of 80 basis points over Treasurys.

The company offered $1 billion of 4.55% notes due August of 2031 at a yield spread of 70 basis points over Treasurys. It issued $2.5 billion of 4.75% notes that mature in August of 2034 at 80 basis points over Treasurys, offered $3.25 billion of 5.40% notes due August of 2054 at 115 basis points over Treasurys and $2.75 billion of 5.55% notes that mature in August of 2064 at 130 basis points over Treasurys.

The next chart shows the flows into the group's outstanding bonds over the last two weeks with the blue arrow highlighting that Meta attracted the most interest.

The next chart shows flows into Meta's bonds with strong buying in the outstanding 30-years, highlighted by the yellow circle.

Meta has some $18.5 billion in bonds outstanding, according to FactSet, with about $2.8 billion to come due in 2027.

Other U.S. companies tapping the bond market Wednesday include paint maker Sherwin-Williams Co. (SHW), hospital operator HCA Inc. (HCA), homebuilder D.R. Horton Inc. (DHI), car parts makers Borg Warner Inc. (BWA) and Genuine Parts Co. Inc. (GPC), Coca-Cola Co. (KO), GE Healthcare Technologies Inc. (GEHC), and Host Hotels & Resorts Inc. (HST)

Meta's stock, meanwhile, was flat Wednesday and was on track for a one-month decline of about 9%.

Read now: The 'short volatility' trade has finally blown up. Why investors probably aren't waiting to pile back in.

-Ciara Linnane

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08-07-24 1516ET

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