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Exxon raises $9.5b to load up on cash while debt market still open to new deals
Exxon raised $9.5 billion by selling five different bonds with a variety of durations ranging from five years to 31 years.
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A logo of the Exxon Mobil Corp is seen at the Rio Oil and Gas Expo and Conference in Rio de Janeiro, Brazil on Sept. 24, 2018. (Reuters/Sergio Moraes)
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xxon Mobil Corp on Monday raised US$9.5 billion in new debt, with the largest US oil producer seeking to bolster its finances while debt markets remain open to new deals.
Exxon paid a lower price to borrow than it did in a similar debt deal almost four weeks ago, a sign of how investor confidence is gradually returning after a rout in energy prices and a stock market collapse fueled by the coronavirus outbreak.
Nevertheless, borrowing costs for Exxon were still higher than prior to the coronavirus outbreak.
Exxon raised $9.5 billion by selling five different bonds with a variety of durations ranging from five years to 31 years, up from $9 billion which it had originally planned to raise, indicating robust investor demand.
In an example of how the company’s borrowing costs have come down in recent weeks, it priced a 10.5-year bond worth $2 billion at a 185 basis-point premium to US Treasuries with a 2.61 percent yield. On March 17, Exxon sold $2 billion in debt with a 10-year duration where the premium to US Treasuries was 240 basis points and the yield was 3.482 percent.
In August last year, Exxon raised $1.25 billion through a 10-year bond with a premium to US Treasuries of just 75 basis points and a yield of 2.44 percent.
The new issue by Exxon comes as highly rated US companies have been tapping debt markets for cash at a record clip, stocking up on cash due to the uncertainty surrounding the economic impact from coronavirus.
The logic behind Exxon’s deal was to stock up further on cash while the market is still open to issuers of new debt, according to a person familiar with the matter.
Exxon’s stock has been hammered this year by the collapse in oil prices, with its share price down 38.7 percent so far in 2020, a steeper fall than the 14.5 percent drop in the benchmark S&P 500 Index.
In a regulatory filing, Exxon said it planned to use the proceeds for “general corporate purposes.”
Oil prices were mixed on Monday, as the historic production-cut deal signed by major global oil producers was not enough to assuage existing worries about the demand destruction brought on by the coronavirus pandemic.
Other companies to issue new debt on Monday included US industrial conglomerate General Electric Co, drug store chain Walgreens Boots Alliance Inc and movie theater operator Cinemark Holdings Inc.
