Blockbuster US bond offering brews

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Mega-brewer Anheuser-Busch InBev has tested investor appetite for a potential blockbuster bond offering later this week, as the group lines up financing for its $108bn takeover of rival SABMiller.

Bankers in New York and London have been gauging investor interest in what could be a record breaking debt offering, potentially eclipsing the watershed $49bn issue completed by telecom provider Verizon in 2013.

People familiar with the matter said that the Belgium-based company was monitoring market conditions before deciding whether to sell the bonds. A deal could come as soon as this week if global credit markets remain calm in the aftermath of China-related turmoil.

The merger between the two drinks companies was agreed in November and created the largest brewer in the world for a total cost of $108bn. AB InBev lined up a two-year $15bn bridge loan and a $15bn one-year bridge loan with a one-year extension option as part of a larger $75bn financing package to complete the deal.

The two $15bn bridge loans were expected to be converted into bonds upon completion of the transaction, which must still clear regulatory approval. The company could also convert a portion of its term loan facilities into bonds, which would swell the size of a debt offering this year.

AB InBev has planned to put the Peroni and Grolsch brands up for sale in a bid to win regulatory approval in Europe. As part of its original agreement to acquire SABMiller, the mega brewer said it would sell the UK group’s stake in MillerCoors to Molson Coors for $12bn.

More than $5tn of mergers were completed in the past year, setting a new record and more than doubling the total in 2014. The volume of transactions agreed means that debt bankers are now debating whether debt markets will be able to comfortably finance all the deals.

The volume of so-called jumbo bonds, or more than $10bn in value, surged last year as a mergers and acquisitions boom drove companies to try to lock in cheap financing before the Federal Reserve raised interest rates from near-zero levels.

Investors have also preferred large bond deals as they increasingly fret about liquidity in the bond market and an inability to sell their portion of smaller issues without dramatically moving the price on offer downwards.

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