Exxon Mobil Corp. plans to sell as much as $8-billion (U.S.) of bonds in what would be its largest ever debt deal and the biggest energy-related offering since the plunge in crude prices.
The world's largest oil company by market value boosted the deal by about 14 per cent after marketing $7-billion of debt earlier, according to a person with knowledge of the deal who asked not be identified citing lack of authorization to speak publicly. Irving, Tex.-based Exxon may issue the securities in as many as seven parts, the person said.
Exxon holds top triple-A credit ratings from Moody's Investors Service and Standard & Poor's, making it one of only a handful of U.S. corporations that stands on nearly equal footing with governments in debt markets. Investors are hungry for the high-quality bonds, as they offer higher yields than sovereign debt with almost no additional risk.
"There's tremendous appetite from the investor community to buy high-value corporate names like Exxon and Chevron," said Dan Heckman, a senior fixed-income strategist at U.S. Bank Wealth Management in Kansas City, Mo. "People are always trying to seek out the cream of the crop."
The longest-maturity portion may be 30-year notes that are expected to yield about 85 basis points more than comparable Treasuries, the person said. A basis point is 0.01 percentage point.
'War Chest'
The new debt offering is probably motivated by the low cost of borrowing and a desire to be prepared for what lies ahead, according to Heckman.
"There's good demand, spreads are still reasonable, and I think it is an insurance policy as well, in case spreads widen down the road or the company needs a war chest for acquisitions," he said.
While the 50-per-cent drop in crude oil prices since June will hurt international oil companies, Exxon remains in a better position than most to weather the downturn, Moody's said Tuesday in a report.
Proceeds from the bond sale may be used to fund general corporate purposes, including acquisitions, capital expenditures, and refinancing, according to the person familiar with the deal.