CVS Health Plans Bond Sale and $3 Billion Debt Repurchase

CVS Health Corp announced plans to conduct discussions with investors regarding a potential bond sale while also planning to repurchase its existing bonds worth approximately $3 billion. The company is leveraging the services of Barclays Plc, Citigroup, and Goldman Sachs to facilitate these discussions on Monday. Following these talks, there is a possibility of issuing secondary subordinated debt.

In a simultaneous move, CVS has initiated a buyback offer targeting both its bonds and those of its Aetna insurance subsidiary. The buyback encompasses around $950 million in bonds maturing in March 2025 as well as an additional $2 billion in longer-dated bonds. This buyback offer is being managed by Barclays and Mizuho Financial Group Inc.

This strategy is part of CVS's efforts to address the significant debt burden that has increased following a series of acquisitions, including the approximately $70 billion Aetna acquisition in 2018. These moves have led to rising debts while earnings have remained relatively unchanged. As a result, Moody's Ratings is considering downgrading CVS's credit rating by one notch in the coming months, potentially placing the company just above junk status. Similarly, S&P Global Ratings indicated that CVS's high-grade status could be downgraded within the next two years.

Despite these potential downgrades, CVS's decision to repurchase debt is seen as a sign of management's confidence in the company's liquidity and its ability to refinance obligations. According to Bloomberg Intelligence analyst Jean-Yves Coupin, CVS had approximately $80 billion in long-term debt, including leases, as of June 30. The debt repurchase and bond sale efforts form part of CVS's strategy to stabilize its financial position and continue growth following its expansive acquisition history.