Kimberly-Clark raises $4.9bn in bonds and scraps its bridge loan for the Kenvue deal

The company has dropped the last $3.9bn of standby bank backing, leaving bondholders to rely on a redemption clause if the acquisition fails.

Kimberly-Clark has raised $4.9bn from a private sale of senior unsecured notes in five tranches, and has cancelled the $3.9bn left on the JPMorgan Chase Bank bridge loan that was arranged as a backstop for its purchase of Kenvue. The money is meant to cover part of the cash price of the acquisition, plus fees and expenses. With the bonds placed, the financing question that hung over the deal is closed.

That question was a live one. The terms were priced on October 20, the same day UBS cut its price target on the company over concerns about its balance sheet. Replacing a standby bank facility with long-dated bonds answers that worry directly, though it also swaps an option for a commitment: the bridge cost little while undrawn, whereas the notes carry fixed interest whenever the deal closes, and whether or not it does.

Bondholders have some protection. If the acquisition is not completed by the agreed outside date, or if Kimberly-Clark abandons it, the notes must be redeemed at 101% of principal plus accrued interest. The notes will also gain a guarantee from Kenvue if the related exchange offers for Kenvue's existing notes are not completed as specified.

Those exchange offers have now been extended to November 2 and are tied to the same outside date. That is where the risk sits. Funding is settled, so the outcome turns on whether the acquisition closes in the fourth quarter, and any slippage would leave Kimberly-Clark paying interest on debt raised for a deal that had not yet closed.