Medtronic continues to move toward finalizing the Covidien acquisition, one of the largest of the year in the medical device space — if not the largest, according to a Wall Street Journal report.
The company is selling around $10 billion in bonds to finance the acquisition before the year's end to lock in low rates. The company may also take on around $16 million in debt for the transaction with recent legislative changes making it more difficult to exercise the "tax inversion" strategy without paying a fine. This debt could impact Medtronic's credit rating, which Moody's says could cause it to fall one notch to A3.
Medtronic plans to move headquarters overseas to Ireland, where Covidien is based. The lower tax rate in Ireland is attractive to large companies, especially medical device companies with the 2.3 percent medical device excise tax.
Here are four quick facts about the bonds sold:
1. There are some investors that may purchase the new Medtronic bonds, "depending on the yields offered," according to the WSJ report.
2. Medtronic previously sold bonds in February.
3. The company's 10-year bonds traded at 3.416 percent recently, which is 1.09 percentage points more than comparable Treasurys, according to the report.
4. The bonds' performance lagged behind the broader market since the sale, according to the report.