Intel Corp. tapped the bond market for $7 billion to finance part of its $16.7 billion takeover of Altera Corp. at lower rates than initially offered to investors.

The world’s biggest chipmaker sold the longest portion of the four-part deal, $2 billion of 30-year, 4.9 percent securities, to yield 1.85 percentage points more than similar-maturity Treasuries, according to data compiled by Bloomberg. The spread tightened as the day went on, according to a person with knowledge of the matter. Similar-maturity debt was traded at a 1.8 percentage point spread in the secondary market on Tuesday, Bloomberg data show.

Intel may have offered generous terms to appease investors dealing with a turbulent market, CreditSights Inc. analysts led by Erin Lyons wrote in a research note Wednesday, as a disappointing earnings forecast from Apple Inc. sent technology stocks tumbling. Speculation that Intel peer Qualcomm Inc. would split may have also “soured investors’ opinions of highly rated tech companies,” they wrote.

Intel initially offered the 30-year bonds was at 2.05 percentage points more than Treasuries, said the person with knowledge of the matter, who asked not to be identified because the marketing was private.

Underwriters bringing large deals to the market have been initiating them with relatively wide premiums, only to allow demand for the debt to narrow the spreads before the securities price, according to Nicholas Elfner, head of corporate-bond research at Breckinridge Capital Advisors Inc., which manages $22 billion.

“What we’ve seen with these mega-corporate-bond deals is, typically, initial price talk doesn’t hold up,” he said.

The tightening mirrors UnitedHealth Group Inc.’s $10.5 billion bond deal on June 20, the yield of which narrowed throughout the course of the day as orders flowed in.

Bank of America Corp. and Wells Fargo & Co. arranged the Intel debt, Bloomberg data show.

Investors had been expecting a bond deal from the chipmaker since Chief Financial Officer Stacy Smith said last week that the company planned to issue $7 billion to $9 billion of debt to finance its Altera purchase. Intel is looking for growth beyond the struggling personal-computer market and is seeking to defend its presence in data centers by buying Altera, which makes chips used in servers.

By: DocMemory
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