U.S. High-Grade Bond Sales Have Busiest Week Since 2022

U.S. investment-grade corporate bond sales surpassed $60 billion this week, marking the busiest week in nearly two years. The bond rush was propelled by a rare Friday offering from 3M Co.’s healthcare unit Solventum Corp.

The firm’s $6.9 billion deal brings this week’s volume to $60.3 billion, the most since $70 billion of notes priced in the week ended March 11, 2022, according to Bloomberg News analysis.

Solventum sold bonds in six tenors, with proceeds going toward a payment to 3M, according to a person with knowledge of the matter. The longest portion of the offering, a 40-year security, will yield 1.65 percentage point above Treasuries, after initial discussions of 1.9 percentage point, said the person, who asked not to be identified as the details are private.

The company, which is spinning off from 3M, is looking to borrow about $8.4 billion—with about $7.7 billion in proceeds set to be returned to the parent, 3M CEO Mike Roman said at a Citigroup conference on Wednesday. Solventum would retain about $600 million, he said.

The cash will boost 3M’s war chest as the firm prepares to fund huge settlements to resolve lawsuits targeting the company over its decades of producing so-called “forever chemicals.”

3M last year agreed to pay as much as $12.5 billion to resolve claims by drinking water utilities that the substances had tainted water supplies across much of the U.S. That pact doesn’t address other lawsuits, such as those filed by states or individuals, which analysts have estimated are likely to cost billions of dollars more to resolve.

‘Impressive Outcome’

In a sign of just how strong demand has been, average high-grade bond spreads have this week narrowed to the tightest since November 2021 despite a bevy of large debt deals.

Pharmaceutical giant AbbVie Inc.’s $15 billion deal to help fund its acquisitions of ImmunoGen Inc. and Cerevel Therapeutics Holdings Inc. gathered more than $80 billion of orders. Last week, peer Bristol-Myers Squibb Co. had orders top $85 billion for its bond offering to finance a pair of its own acquisitions.

Expectations that current attractive yields will be lower in the future are driving the demand for high-grade debt, JPMorgan Chase & Co. analysts led by Eric Beinstein and Nathaniel Rosenbaum wrote in a note Friday. “This is an impressive outcome, with the record pace of supply year-to-date and yet spreads close to the post–Great Financial Crisis tightest level,” they said. “A strong risk-on environment in equity markets has, of course, been supportive for spreads.”

3M announced plans to spin off its healthcare operations in July 2022. Solventum may have an enterprise value of near $30 billion, Bloomberg Intelligence analyst Joel Levington wrote in a November note.

The spinoff, which is expected to occur by mid-2024, will reshape an industrial conglomerate known for diverse product lines from electronic components to dental adhesives to Post-it notes. Solventum will have healthcare products such as wound care and other surgical supplies, software systems for hospitals, and purification systems.

Bank of America Corp., Goldman Sachs Group Inc., JPMorgan, and Morgan Stanley are managing the bond sale, said the person.

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