Mega-mashup: Discovery clears $30 billion bond to finance WarnerMedia deal, a bullish sign for a rattled market

Debt-led corporate mega-mashups are back.

Investors piled into Discovery Inc.’s

$30 billion U.S. investment-grade corporate bond deal on Wednesday to finance its mashup with AT&T’s

WarnerMedia, a bullish sign for markets rattled by Russia’s invasion of Ukraine.

Order books on the 11-part bond deal were reported to reach $106 billion, or nearly 3.5 times the available bonds, despite its large size and recent volatility sparked by the deepening crisis in Ukraine.

See: Credit markets still cautiously open to U.S. companies as Russia-Ukraine war escalates

“It’s definitely related to the risk-on tone with oil prices down,” said Tom Murphy, head of investment-grade credit at Columbia Threadneedle Investments, in a phone call.

“We’ve got eight deals tomorrow, so we get to start the process over again,” Murphy said of the new-issue pipeline. But he also said it’s a positive market signal when a megadeal clears in a year when total returns have been down sharply.

Goldman Sachs pegged total returns for the U.S. investment-grade bond market at minus-5.9% on the year, through last week, versus negative-4.2% for the U.S. high-yield bond sector.

Investors last week also pulled $5.4 billion from U.S. investment-grade bond and exchange-traded funds, the biggest outflows since the liquidity crisis of March 2020, according to BofA Global.

The tone, however,…

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