And it is outsized, even by colossal Merck standards. This is plainly a bet that rates in the US will have to rise, next year -- if not before. And stay "up" -- for a few years. Note that the smallest tranches are floating rate, and near term maturities. That's a corporate rope-a-dope, as those can be reset / tendered out -- in a few years. No, the bulk of this is long term, fixed rate debt -- at over 4.25%. That suggests that Merck expects this is near the bottom of the curve, rate-wise -- for longer term debt.
That would be consistent with expecting ugly inflation rates in 2026, as Tangerine 2.0's tariffs take hold. I would also observe that Merck's tiny spread over applicable Treasuries makes it not markedly different than a proxy for US Treasury interest rates themselves. [That is, this is not a "risk-on" bond issuer, in any sense -- not materially riskier than owning the US debt, itself -- at least.] In any event, here's the SEC Form 8-K, as filed -- and a bit from a financial rag:
. . .On September 9, 2025, Merck & Co., Inc. successfully closed a significant public offering of various notes totaling $6 billion, with maturities ranging from 2027 to 2055. This strategic financial move is expected to strengthen the company’s capital structure and support its ongoing operations and growth initiatives. . . .
On September 9, 2025, Merck & Co., Inc. (the “Company”) closed an underwritten public offering of $500,000,000 aggregate principal amount of Floating Rate Notes due 2027 (the “Floating Rate Notes”), $750,000,000 aggregate principal amount of 3.850% Notes due 2027 (the “2027 Notes”), $750,000,000 aggregate principal amount of 4.150% Notes due 2030 (the “2030 Notes”), $1,000,000,000 aggregate principal amount of 4.550% Notes due 2032 (the “2032 Notes”), $1,750,000,000 aggregate principal amount of 4.950% Notes due 2035 (the “2035 Notes”) and $1,250,000,000 aggregate principal amount of 5.700% Notes due 2055 (the “2055 Notes” and, together with the Floating Rate Notes, the 2027 Notes, the 2030 Notes, the 2032 Notes and the 2035 Notes, collectively, the “Notes”) under the Company’s Registration Statement on Form S-3ASR (Registration No. 333-278066), originally filed with the Securities and Exchange Commission (the “Commission”) on March 19, 2024, as amended by Post-Effective Amendment No. 1, filed with the Commission on May 14, 2024. . . .
Now you know. And so -- Mr. Davis must believe that Federal Reserve Chairman Powell is also "rope-a-doping" (with a widely expected small decrease in rates, here in September), and ultimately -- longer term rate increases. That is, the view at Merck seems to be that if he does lower them in September. . . he is likely to raise them anew, come January 2026 (and keep that belt tightening over a few years' time).
We shall see -- but it is also fascinating that Merck took the view in 2017, as Trump 1.0 got underway, that he would force interest rates skyward, just as he has -- here in Tangerine 2.0 (though the Donald tries to "boil the ocean with his Zippo lighter", by yelling at Chairman Powell). It is the Trump policies (1.0 and 2.0) that cause unwelcome calamity -- in the interest rate outlook / futures pictures, for the US.
Hilarious!
नमस्ते
No comments:
Post a Comment