UnitedHealth Group is raising US$3bn in the US high-grade market as the biggest US health insurer navigates scrutiny from regulators looking into the company's billing practices under its Medicare healthcare plans.
Tuesday's bond offering from the Minnesota-based company is part of its customary yearly fundraising, with UnitedHealth typically issuing in the spring and summer months. Last year, it printed a US$12bn bond offering – its largest debt transaction – in April.
Active leads Barclays, Bank of America, Citigroup and Morgan Stanley launched the US$500m of threes, US$750m of fives, US$1bn of 10s and US$750m of 30s at Treasuries plus 52bp, 70bp, 92bp and 112bp, respectively. Those spreads followed IPTs in the areas of 80bp, 95bp, 120bp and 140bp. The SEC-registered offering is expected to receive ratings of A2/A+/A.
At IPTs, the bonds were coming 30bp to 32bp wide to UnitedHealth's existing notes in the secondary markets, Terri Cancelarich, senior analyst at Gimme Credit, said via email.
The embattled company, whose stock is down about 40% this year, has come under pressure from investors and the Trump administration related to its focus on Medicare Advantage plans, which had been a key source of revenue.
UnitedHealth's CEO stepped down in May and was replaced by Stephen Hemsley, who had previously served as the company's CEO.
Mirroring the company's recent travails, UnitedHealth's bonds have performed poorly this year, leaving its debt trading wider than comparably rated bonds. Single A rated US corporate bonds traded at an average spread of 73bp over Treasuries on Monday, according to ICE BofA index data. UnitedHealth's 5.8% 2036 senior note was trading at 96bp over on the same day, according to MarketAxess.
But for some, that widening has made UnitedHealth's bonds more attractive, not less.
"We think current spreads price in known risks," said Cancelarich.
(Sunny Oh)