By Danielle Robinson
NEW YORK, Feb 24 (IFR) - Cisco Systems has launched
an US$8 billion seven-tranche jumbo bond issue after being
deluged with more than US$21 billion of orders for its first
debt transaction in three years.
The deal, led by Barclays, Bank of America Merrill Lynch,
Deutsche Bank and JP Morgan, is the biggest investment-grade
bond of the year so far, and the second largest offering from a
technology company, behind Apple's US$17bn deal in 2013.
Investors jumped at the chance to buy the bond, whose
proceeds will take out US$3.75bn of Cisco notes coming due this
Cisco, which has suffered lacklustre earnings in recent
quarters, was also generous with spread, especially for the
"This deal looked particularly attractive at the front end,"
said one investor who took part in the deal. "I'd say you are
getting about 5-10bp of new issue concession for the three and
five-year tranches, so I think there will be a good bid on the
The seven-tranche issue includes US$850 million of 18-month
floating rate notes, launched at three-month Libor plus 5bp;
US$2.4 billion of three-year fixed rate notes at Treasuries plus
40bp; US$1 billion of three-year floaters at three-month Libor
plus 28bp; US$1.75 billion of five-year fixed rate securities at
Treasuries plus 60bp; US$500 million of five-year floaters at
three-month plus 50bp; US$500 million of seven-year notes at
Treasuries plus 75bp and US$1 billion of 10-year securities at
Treasuries plus 90bp.
That compares with initial price thoughts of Libor plus
5-7bp on the 18-month FRN, T+45bp area on the three-year fixed,
3mL+33bp area on the three-year FRN, T+70bp area on the
five-year fixed, 3mL+60bp area on the five-year FRN, T+95bp area
on the seven-year fixed and T+105bp area on the 10-year fixed.
Cisco, rated A1/AA-, is also expected to use the proceeds to
beef up cash levels as it continues its aggressive program of
returning capital to shareholders this year, including the
repurchase of common stock and the payment of cash dividends.
Citigroup, HSBC, and Wells Fargo are passives on the deal.
Cisco spent US$4bn in its second fiscal quarter ending
January 25 to buy back shares.