Since Oracle agreed to buy Cerner in an acquisition worth $28.4 billion, it has made two moves to try to pay it off — selling bonds and increasing its term loan by $1.3 billion.
The move to buy Cerner was one of Oracle's largest acquisitions to date, and it seems the software giant is looking to seize the moment in a credit market recovery.
On Oct. 27, Bloomberg reported that Oracle was in discussions with banks to try to increase the size of its $4.4 billion loan in order to refinance the debt used to purchase Cerner.
The company ended up increasing the loan size by $1.3 billion.
The added proceeds will be going toward paying down a bridge loan Oracle used to fund the Cerner acquisition.
The Cerner acquisition was originally funded with about $15.7 billion of bridge loan debt provided by a group of banks.
This kind of debt is typically refinanced into longer-term bonds and loans.
Oracle later borrowed about $4.4 billion through a term loan agreement, using that to reduce the bridge facility.
But the increase in loans wasn't enough. Oracle made a second move in order to fund the large EHR vendor purchase by selling $7 billion worth of bonds.
Oracle sold the bonds in as many as four parts.
Subsequently, this caused Fitch to downgrade the company's credit rating from "BBB+" to "BBB," making Oracle's rating outlook negative.
"Today's Oracle deal has been anticipated for months, and we expect healthy participation from the buyside even though it's a company that has been remarkably inattentive to maintaining its credit rating profile," Baylor Lancaster-Samuel, vice president of fixed income at Amerant Investments, said in an email to Bloomberg. "As recently as 2020, Oracle was rated high 'A,' and with the Cerner deal, there was some threat that Oracle could flirt with a 'BBB-' rating at the lowest rung of investment grade."
Three credit rating agencies warned in December that they would possibly downgrade the company's investment-grade ratings if it used debt to finance the acquisition.