Why Is Pfizer Inc. (NYSE:PFE) Raising $5 Billion In Debt?

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Pfizer Inc. (NYSE:PFE) is in the process of raising $5 billion through notes issuance. The company said it would issue the notes in five tranches and the offering is expected to take place on June 3. But why is the company raising debt at this point?

The word from Pfizer’s officials is that the company is hoping to issuing debt to raise money to fund general corporate purposes. When you look deeper into the press release announcing the notes offering, you find that Pfizer has listed the retirement of certain outstanding notes as one of the reasons for the debt fundraiser.

Looking at the timing of the debt issuance, we can also see a strategic move by Pfizer. The company appears to be looking to take advantage of the prevailing low interest rates environment to raise additional capital that it needs to strengthen the balance sheet and for other activities. The Federal Reserve is expected to raise interest rates any time after months of apparent procrastination. But Pfizer is poised to close its debt transaction before the Feds hikes interest rates.

What are the details of the notes on offer?

Pfizer has chosen to offer the notes in five tranches. In that case, the company is offering $1.25 billion worth of notes with interest of 1.2% that will be due in 2018. The second tranche is $850 million notes attracting interest of 1.45% due in 2019. The third tranche is $1.15 billion worth of notes at interest of 1.95% to be due in 2021. The fourth category is of notes worth $1.25 billion and attracting 2.75% interest and maturing in 2026. The fifth and the last tranche are notes worth $500 million at interest rate of 4.4% and maturing in 2044.

Pfizer has tapped Barclays Capital, Goldman, Morgan Stanley and J.P. Morgan Securities as joint book-runners in the debt offering.

Planned acquisition

The announcement of the debt fundraiser comes after Pfizer recently said it was in the process of acquiring Anacor Pharmaceuticals Inc (NASDAQ:ANAC) for $5.2 billion including debt. It is not clear whether some of the proceeds from the debt offering will go into the Anacor buyout.

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