Issuer: Phillips Petroleum Co
Amount: $2.5 billionType of issue: Global bond Date of issue: May17Bookrunners: JP Morgan, Merrill Lynch
At a time when corporate bond issuers are struggling to win support from fixed-income investors, BBB-rated Phillips Petroleum showed that the global bond markets are still open to finance big acquisitions for companies in the right sectors, as long as they have credible management teams and quality assets.
Phillips achieved hefty over-subscriptions on its
$1.15 billion five-year and $1.35 billion 10-year global bonds. It attracted over $8 billion of demand, despite investors in its outstanding long-dated bonds having recently suffered spread widening following two notch downgrades in its credit ratings from A-/A3 to BBB/Baa2. It increased the total deal size modestly from the initial target of $2 billion.Prompting both the downgrades and the latest global bond oVer was the same event: a transformational acquisition for the 83-year-old company, which operates in four businesses - petroleum exploration and production, gas gathering, chemicals and refining. At the end of April, Phillips received Federal Trade Commission approval for the $7 billion acquisition of Arco's oil assets in Alaska from BP. This is a deal that propels Phillips into the major league in the oil and gas sector.