Meta, Facebook’s parent company, makes the first-ever bond issue

The Meta Platforms logo is seen in Davos, Switzerland May 22, 2022. Picture taken May 22, 2022. REUTERS/Arnd Wiegmann//File Photo

Aug 4 (Reuters) – Meta Platforms, the parent company of Facebook (META.O), announced on Thursday that it would make its first-ever bond issue, at a time when the social media company is making massive investments to fund its virtual reality projects.

Meta did not disclose the size of the offering, but said it would use the proceeds for capital expenditures, stock buybacks, acquisitions or investments.

The company received an “A1” rating from Moody’s and an “AA-” rating and “stable” outlook from S&P. Meta sells four bond tranches with maturities ranging from five years to 40 years.

Among the big tech companies, Meta is the only one that has no debt on its books. Tapping the market now would give him more financial breathing room as he tries to fund costly overhauls, including a bet on augmented and virtual reality technology, investors who heard his pitch for the bid said on Tuesday. obligations.

It could also be a rare opportunity to do so relatively inexpensively in the current market environment. Corporate bonds have rebounded in the past month after a rout earlier this year as investors hoped the US Federal Reserve’s fight against inflation through rapid rate hikes was starting to have some impact .

This week, high-quality U.S. primary bond markets rebounded, with companies raising more than $38 billion, making it the eighth busiest week of the year, according to data from Informa Global Markets.

Other tech giants such as Apple Inc (AAPL.O) and Intel Corp (INTC.O) also issued bonds earlier this week, raising $5.5 billion and $6 billion, respectively.

Bankers and investors said such issuance windows could be rare in the coming months. A banker in charge of a bond syndicate office at a US bank said credit spreads could widen later this year, raising funding costs. Read more

Meta’s bond issue will come after the company issued a grim forecast and recorded its first-ever quarterly decline in revenue as recession fears and competitive pressures weighed on its digital ad sales. Read more

Its free cash flow is drying up as it continues its metaverse projects, which led to its name being changed to Facebook’s Meta Platforms last year.

In the second quarter ended June 30, Meta had $4.45 billion in free cash flow, compared to $8.51 billion a year ago and $8.53 billion in the prior quarter.

Chief Financial Officer Dave Wehner said on a post-earnings conference call that the company has a “substantial amount” in its buyback program and plans to continue buybacks as part of its capital allocation strategy.

Reporting by Nivedita Balu in Bengaluru and Shankar Ramakrishnan; Editing by Saumyadeb Chakrabarty and Paritosh Bansal

Our standards: The Thomson Reuters Trust Principles.