Bloomberg reports that CVS Health Corp. is in discussions with investors regarding the potential sale of as much as $2.5 billion in bonds. This move comes as the healthcare company aims to address its financial situation after years of acquisitions that have led to a significant increase in debt and stagnant earnings.Investor Calls and Debt Sale Timeline
The health care company has asked Barclays Plc, Citigroup Inc., and Goldman Sachs Group Inc. to arrange investor calls on Monday. It is expected that the new debt sale could take place as early as Tuesday and is likely to be in the range of $2 billion to $2.5 billion. The securities being offered will have characteristics of both debt and equity, known as hybrids. This unique structure allows for more flexibility in the company's financial operations.Proceeds and Debt Buyback
The proceeds from the bond sale will be used to buy back debt. CVS Health Corp. has separately stated on Monday that it intends to repurchase as much as $2 billion of bonds issued by CVS and its Aetna insurance unit through a tender offer. This shows management's confidence in the company's liquidity position and its ability to refinance debt. As of June 30, the company had approximately $80 billion of long-term debt, including leases. CVS purchased Aetna in a 2018 deal worth about $70 billion.Impact on Ratings
Moody's Ratings is considering lowering CVS Health Corp.'s grades by one notch in the coming months. This review could bring the company to just a step above high-yield status. S&P Global Ratings has also signaled the possibility of a downgrade to the edge of high-grade over the next two years. However, the company's offer to buy back debt indicates its determination to improve its financial standing and maintain its creditworthiness.Details of Tender Offer
Up to $950 million of the notes that the Woonsocket, Rhode Island-based company is buying back are due in March 2025. The other series of notes it is offering to buy back are of a longer term. Barclays and Mizuho Financial Group Inc. are leading the tender offer. This shows the active involvement of these financial institutions in supporting CVS Health Corp.'s debt management efforts.CVS is clearly taking significant steps to turn its financial situation around. By selling bonds and buying back debt, the company hopes to reduce its debt load and improve its earnings. These actions are crucial for its long-term stability and growth.
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