Oracle seeks to increase its loan to reduce its dependence on the bond market | Techno Glob


(Bloomberg) – Oracle Corp. talks to banks about increasing the size of a $4.4 billion term loan that helped fund its acquisition of Cerner Corp., which would allow it to borrow less money in the turbulent bond market to procurement.

The magnitude of the increase is still under discussion, according to people familiar with the matter. But the proceeds would refinance short-term debt used to fund the Cerner purchase, the people said, asking not to be identified discussing a private transaction.

Oracle may increase the term loan to a maximum of $6 billion within existing loan documentation, according to a filing. The company initially financed the acquisition with approximately $15.7 billion in debt known as a bridge loan provided by a group of banks. This debt is usually subsequently refinanced into longer-term bonds and loans.

The $4.4 billion term loan Oracle signed in August partially refinanced that debt, reducing the bridge loan to about $11 billion. A representative for Bank of America Corp., the bridge bond’s administrative agent, declined to comment, as did the company. A representative from the Bank of Nova Scotia, the term debt’s administrative agent, also declined to comment.

Read more: Oracle’s new $4.4 billion loan narrows deck for Cerner deal

Companies are increasingly reluctant to rely on the corporate bond market for financing, as yields remain high and access for many borrowers is uneven. But the market has stabilized in recent days, allowing UnitedHealth to sell $9 billion in debt on Tuesday to help fund its acquisition of Change Healthcare Inc.

The company had more than $90 billion in total debt at the end of August, which Bloomberg Intelligence analyst Robert Schiffman said is one of the largest totals among its tech peers. But in September, S&P Global Ratings said it was no longer actively considering whether to downgrade the company, whose credit rating is twice above poor quality. The bond evaluator instead said there could be a downgrade in ratings over the medium term, known as the negative outlook. This change was positive, BI’s Schiffman wrote.

“With S&P significantly reducing downgrade risk, Oracle (Baa2/BBB/BBB+) could be poised to outperform its big tech peers, especially if it decides to forgo long-term bond funding after the close. of its acquisition of Cerner Corp.,” according to Schiffman.

(Updates with sixth paragraph analyst comment)

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