CVS starts bond sale days after cutting 2024 outlook

CVS Health Corp. is selling bonds less then a week after shares plunged the most since 2009 on a downbeat quarterly report and cut 2024 outlook, joining a bevy of firms hitting the debt market following earnings season. The drug-store heavyweight and health insurer is offering notes in as many as five parts, according to a person with knowledge of the matter. Size details have yet to be disclosed, but CreditSights analysts are estimating total issuance will be $4 billion to $5 billion.

The longest portion of the deal, a 30-year security, may yield 1.75 percentage points above Treasuries, said the person, who asked not to be identified as the details are private. Proceeds may be used for a range of general corporate purposes including capital expenditures and repaying notes maturing this year. 

CVS’s outlook and latest results were hurt by increased medical costs in the Medicare insurance segment. The same is being faced by fellow insurers that sell Medicare Advantage plans, private versions of the US government health program for seniors, as more older adults seek treatments they delayed due to the pandemic.

That’s not CVS’s sole issue as retail drugstores in general have been under pressure and its health-services business, which includes pharmacy benefits, missed revenue estimates last quarter.

This week has seen a flood of companies hit the US debt markets, including the investment-grade segment that CVS is issuing notes. Spreads there are at their tightest relative to government debt in 2 1/2 years and more high-grade issuers have entered the primary dollar bond market the past two days than at any other point in 2024.

Barclays Plc, Bank of America Corp., Goldman Sachs Group Inc., JPMorgan Chase & Co. and Wells Fargo & Co are managing the bond sale, the person said.

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