Western Digital Corp. is sweetening terms for the largest junk-bond offering of the year to win investor support for a debt sale to finance the company’s takeover of SanDisk Corp., according to people with knowledge of the matter.

A $4.1 billion unsecured bond is now being offered with a yield of about 10.5 percent, after being initially marketed at about 9 percent, the people said, asking not to be identified as the information isn’t public. That would be a premium of more than 4.5 percentage points over the average for similarly-rated debt, Bank of America Merrill Lynch index data show. In addition, a $1.5 billion secured bond is now being offered with a yield of about 7.5 percent, up from 6 percent last week, the people said.

The concessions Western Digital is having to offer demonstrate the challenge of selling a large junk-rated deal even as the high-yield market is poised to deliver its biggest monthly gain in more than four years.

JPMorgan Chase & Co., Bank of America Corp., Credit Suisse Group AG and Royal Bank of Canada have committed to financing the deal.

Western Digital spokesman Steve Shattuck didn’t respond to phone and e-mail requests for comment. Representatives for Bank of America and JPMorgan declined to comment.

The acquisition of SanDisk will help Western Digital remain competitive, according to Bloomberg Intelligence analyst Eshani Gupte. The deal also will broaden the company’s portfolio of solid-state drive products, since SanDisk is one of the biggest makers of flash memory in the world.

The $5.6 billion notes sale would be the biggest junk-bond sale of the year, Bloomberg data show. The debt offering for the takeover also includes a $4.2 billion term loan marketed to institutional investors, a $550 million equivalent loan for European investors, a $1 billion revolving-credit line and a $3.75 billion term loan A, which is typically bought by banks.

The yield and discount on the $4.2 billion loan was also boosted, one of the people said.

The unsecured bonds are rated Ba2 by Moody’s Investors Service and BB+ by Standard & Poor’s. The term loan A has more demand than supply, one of the people said.

By: DocMemory
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