new york: Bayer held a call with investors on Monday following a string of bad news, but questions raised whether the German group had been upfront about its prospects ahead of its US$5.75 billion (RM26.9 billion) bond issue. Three people familiar with the matter said that there were some investors who were looking at the deal. The situation became clear on Wednesday (November 22).
The bad news has some bond investors questioning whether Bayer should ease the terms of the deal or withdraw it altogether, one of the people said.
The pharmaceutical and agrochemical group priced the investment grade bond last Thursday, and the deal was completed on Tuesday.
The company on Sunday halted a major late-stage trial testing a new anticoagulant drug that had promised billions of dollars in revenue, on the recommendation of an independent clinical oversight board, in a major setback in drug development. I was disappointed.
Then, in two separate lawsuits, Bayer was ordered on Friday to pay $1.56 billion to plaintiffs over the herbicide Roundup, followed by $165 million on Monday to school officials northeast of Seattle. I received a new order to pay.
Andrew Brady, head of basic industry research at CreditSights, said of investors: “In conversations with clients, many are angry and believe Bayer management pre-empted the news and rushed the deal.” I seriously doubt that.”
A Bayer spokeswoman declined to comment.
The company’s bankers held a phone call Monday with some of its biggest investors to try to appease them, two people familiar with the matter said.
Investors on the conference call asked for clarification on whether the bad news would have a material impact on the company’s bottom line, one of the people said. The company told investors it had reserves to deal with the Roundup lawsuit and could not predict the jury verdict, the people said.
It is unusual for investment-grade bonds to be priced higher after they are priced, according to market participant sources.
In March 2021, Nomura Holdings warned that its U.S. subsidiary could incur losses of $2 billion and shelved a huge bond issue.
Bayer-priced bonds have maturities of 3 to 30 years. Informa Global Markets said it was the 10th largest industrial investment-grade corporate bond deal this year, attracting more than $22 billion in orders.
Citigroup, JP Morgan, SMBC Nikko Securities America and Wells Fargo were bookrunners on the deal.
All banks declined to comment.
Credit spreads on some bonds, or the premiums charged to U.S. Treasuries, were 5 basis points wider on Wednesday to 23 basis points wider than they were priced last Thursday.
CreditSights’ Brady said these events were “not sufficient to trigger a material adverse modification clause in the bond documents requiring investors to repay.” – Reuters