Meta, First Corporate Bond Issuance Since Founding... "10 Billion Dollar Jumbo Deal"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Meta Platforms, the parent company of Facebook, has issued corporate bonds for the first time since its founding, Bloomberg reported on the 4th (local time). Amid a significant decrease in cash holdings over the past year and a nearly 50% drop in stock price compared to the beginning of the year, Meta secured funds through $10 billion (approximately 13 trillion KRW) worth of corporate bonds, which are expected to be used for share buybacks and talent acquisition.

According to the report, Meta's corporate bonds were divided into four types ranging from 5-year to 40-year maturities. A source stated that the longest maturity bond issued by Meta was the 40-year bond, with a yield level of the U.S. Treasury rate plus a spread of 1.65 percentage points, Bloomberg reported. This spread was initially discussed at 1.75 and 1.8 percentage points but was later lowered.

The total amount of corporate bonds issued by Meta was $10 billion. A source revealed that the order size exceeded $30 billion on the day. Meta's credit rating is AA- according to S&P and A1 according to Moody's. Bloomberg described the bond issuance amount exceeding $10 billion as a "jumbo deal."

Meta is expected to use the funds raised through the bond issuance for share buybacks, investment in new technologies, and hiring and retaining talent. Meta recently indicated in an investor presentation related to the bond issuance its intention to invest in technologies including augmented reality (AR) and virtual reality (VR).

Among big tech companies, Meta was the only one, and one of the few S&P 500 companies, that did not hold corporate bonds. A foreign media outlet reported that Meta decided to proceed with the issuance as the corporate bond market, which had been in turmoil for months amid uncertainty over interest rate hikes, has recently begun to recover. Recently, Apple and Intel also issued corporate bonds worth $5.5 billion and $6 billion, respectively.

The reason Meta issued corporate bonds for the first time since its founding appears to be due to the need for funds. According to Bloomberg, Meta's cash decreased by $23.6 billion over the past year, marking the third-largest cash decline among non-financial S&P 500 companies after Amazon and Microsoft (MS). Since the beginning of this year, its market capitalization has halved from $936 billion at the end of last year to $458.4 billion as of the day.