- Fox is tapping the high-grade market right after closing its Roku deal. Fox Corp. began an investment-grade bond sale seeking about $8 billion, offering debt in as many as seven tranches with maturities from three to 40 years, according to a person with knowledge of the matter cited by Bloomberg.
- The proceeds will retire bridge financing. Fox said in a filing the money will repay an $8.4 billion bridge loan used to fund part of the cash consideration for its $22 billion acquisition of Roku, which closed a few days ago; the new bonds would cover roughly 95% of that bridge by our calculation.
- Pricing starts wide on the long end. Initial price talk for the longest tenor is about 2.25 percentage points above Treasuries, the person said. Morgan Stanley is leading the sale after coordinating investor calls on Monday, with Citigroup, Deutsche Bank, Goldman Sachs and JPMorgan also participating.
- The timing is tricky. The offering comes as a hotter-than-expected October inflation reading pushed Treasury yields higher, potentially raising borrowing costs for issuers on Tuesday, while a measure of credit risk inched higher, snapping a two-day decline.
What Happened?
Fox closed its $22 billion purchase of Roku less than five months after announcing it and months ahead of schedule, after securing regulatory approvals more quickly than expected. Days later, the company kicked off a multi-tranche investment-grade bond deal of about $8 billion to term out the $8.4 billion bridge financing it used to fund a portion of the cash it paid. Morgan Stanley is running the deal, with Citigroup, Deutsche Bank, Goldman Sachs and JPMorgan also on it. The bridge loan alone was equal to about 38% of the deal’s headline value, by our calculation.
Why It Matters?
The deal lands on a day when rising Treasury yields lift the all-in borrowing cost for issuers, making it an early test of investor appetite for long-dated corporate debt after the hot CPI print. For Fox, the combination creates a much larger streaming-TV competitor: the company says the merger lets it reach more than 100 million households by pairing live sports, news and local programming with Roku’s connected-TV platform. Fox expects $400 million in annual cost savings within the first two years, with potential for additional revenue, and adding Roku to Tubi, which Fox bought in 2020 and which has become a major growth engine, expands its push into free, ad-supported streaming.
What’s Next?
Watch the final size, tranche mix and pricing versus the initial 2.25-percentage-point talk on the longest bond, which will show how much investors charge for long-dated media credit in a rising-rate backdrop. After the bonds settle, attention shifts to whether Fox delivers on the $400 million cost-savings target and how quickly Roku and Tubi can lift advertising revenue.
Affected Tickers and Coins: FOXA, FOX, MS, LQD
Source: Bloomberg
