Bayer holds call with bond investors after raft of bad news
Reuters
Published Nov 22, 2023 05:42PM ET
Updated Nov 23, 2023 06:30AM ET
By Shankar Ramakrishnan
(Reuters) -Bayer held a call with investors on Monday after a raft of bad news led some of them to question whether the German group had been upfront about its prospects ahead of a $5.75 billion bond issuance, three sources familiar with the situation said on Wednesday.
The bad news prompted some bond investors to question whether Bayer (OTC:BAYRY) should sweeten the terms of the deal or outright pull it, one of the sources said.
The drug-to-pesticides group priced the investment grade bond on Thursday last week, with the deal closing on Tuesday.
On Sunday, it was hit by a major drug development setback when it aborted a large late-stage trial testing a new anti-clotting drug, that promised billions in revenue, acting on recommendation by an independent trial monitoring board.
Then in two separate lawsuits, Bayer was ordered on Friday to pay $1.56 billion to plaintiffs over its Roundup weed-killer, followed by another order on Monday to pay $165 million to employees of a school northeast of Seattle.
"From our conversations with clients, many are angry and are seriously wondering whether Bayer management rushed to bring the deal ahead of the news," said Andrew Brady, CreditSights head of basic industries research, referring to investors.
A Bayer spokesperson declined comment.
The company's bankers held a call with some of the top investors on Monday in a bid to placate them, two of the sources said.
On the call, the investors asked for clarity on whether the bad news would have material impact on the company’s earnings, one of the sources said. The company told investors it had reserves to deal with Roundup litigation, and could not have predicted the jury verdicts, the source said.
It is rare for investment-grade bonds to be pulled after they have priced, according to the sources, who are market participants.
In March 2021, Nomura Holdings (NYSE:NMR) flagged a possible $2 billion loss at a U.S. subsidiary, and shelved a hefty bond issuance.
Bayer priced bonds with maturities between three to 30 years. It was the 10th largest investment grade bond deal by an industrial company this year and attracted more than $22 billion in orders, according to Informa Global Markets.
Citigroup, JP Morgan, SMBC Nikko Securities America and Wells Fargo were the bookrunners on the deal.
All the banks declined comment.
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The credit spreads, or the premium charged over Treasuries, on some of the bonds on Wednesday were bid 5 basis points to 23 basis points wider than where they priced last Thursday.
The events were "not enough to trigger a material adverse change clause in bond documents for investors to ask to be paid back," said CreditSights' Brady.
Written By: Reuters
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