© Reuters. FILE PHOTO: The Bayer AG logo at the German pharmaceutical company’s annual results news conference in Leverkusen, Germany, February 27, 2019. REUTERS/Wolfgang Rattay/File Photo
By Shankar Ramakrishnan
(Reuters) -Bayer held a call with investors on Monday after a series of bad news led some to question whether the German group had been honest about its prospects ahead of a $5.75 billion bond issue. Three sources familiar with the situation said Tuesday. Wednesday.
The bad news led some bond investors to question whether Bayer (OTC:) should improve the terms of the deal or cancel it entirely, one of the sources said.
The pesticide-drug group priced the investment-grade bond on Thursday last week, and the deal closed on Tuesday.
On Sunday, it was hit by a major setback in drug development when it aborted a large late-stage trial testing a new blood-thinning drug that promised billions in revenue, acting on the recommendation of an independent trial monitoring board.
Then, in two separate lawsuits, Bayer was ordered on Friday to pay $1.56 billion to plaintiffs for its Roundup herbicide, followed by another order on Monday to pay $165 million to employees of a school northeast of Seattle.
“From our conversations with clients, many are angry and seriously questioning whether Bayer management was too quick to push the deal ahead of the news,” said Andrew Brady, head of basic industries research at CreditSights, referring to investors.
A Bayer spokesman declined to comment.
The company’s bankers held a call with some major investors on Monday in an attempt to appease them, two of the sources said.
On the call, investors asked for clarity on whether the bad news would have a material impact on the company’s earnings, one of the sources said. The company told investors it had reservations about dealing with the Roundup litigation and could not have predicted the jury verdicts, the source said.
It is rare for investment-grade bonds to be retired after they have been priced, according to the sources, who are market participants.
In March 2021, Nomura Holdings (NYSE:) flagged a potential $2 billion loss at a U.S. subsidiary and shelved a major bond issue.
Bayer priced bonds with maturities between three and 30 years. It was the 10th largest investment-grade bond deal by an industrial company this year and attracted more than $22 billion in orders, according to Informa Global Markets.
Citigroup, JP Morgan, SMBC Nikko Securities America and Wells Fargo were bookrunners on the deal.
All banks declined to comment.
Credit spreads, or the premium charged on Treasury bonds, on some of the bonds on Wednesday were bid between 5 and 23 basis points higher than their price last Thursday.
The developments “were not sufficient to trigger a material adverse change clause in the bond documents for investors to request redemption,” CreditSights’ Brady said.
