CSL’s strong credit metrics support the recent US$1.25 billion 30-year bond issue

About CSL Limited

CSL Limited (CSL, the Group, ASX: CSL) is a global biotechnology business that provides lifesaving products to patients in 100 countries and employs 32,000 people. Originally known as Commonwealth Serum Laboratories, CSL was established in 1916 by the Commonwealth Government to manufacture vaccines like insulin and penicillin and vaccines against influenza, polio, and other infectious diseases. These vaccines were necessary to service Australia’s health needs when the nation was isolated from the rest of the world during the first World War. In June 1994, under a Keating-led government, CSL was publicly floated on the ASX at $2.30 per share.

CSL has three business units – CSL Behring, CSL Seqirus and CSL Vifor. CSL Behring develops and delivers therapies for people living with conditions in the immunology, hematology, cardiovascular, respiratory and transplant therapeutic areas. CSL Seqirus is one of the largest influenza vaccine providers in the world. CSL Vifor focuses on the treatment areas of iron deficiency, dialysis, nephrology and heart failure, kidney disease, gastroenterology, and patient blood. management

30-year Corporate Bond issue

CSL has raised US$1.25 billion in fresh debt from global investors to replace the more expensive bank debt used to finance the Group’s 2022 acquisition of Vifor Pharma Limited. The corporate bond issue was well supported by investors as evidenced by the competitive final bids on the US$750 million of 30-year fixed rate bonds at 5.417 percent and 5.106 percent on the US$500 million 10-year fixed rate tranche. The CSL 30-year bond pricing compares favourably to the recent 31-year Australian Government bond issue at a 4.93 percent yield.

This transaction follows CSL’s highly successful US$4 billion bond issue in April 2022 which included a US$500 million 40-year tranche fixed at 4.95 percent per annum and a $1 billion 30-year tranche fixed at 4.75 percent. Bids received from investors around the world exceeded US$23 billion for the US$4 billion offer, including one investor for US$1 billion. The bonds replaced a more expensive bank bridging finance facility used for the Vifor Pharma acquisition. The 40-year bond is the longest dated debt instrument ever issued by an Australian corporate entity, banking institution, or government borrower.

The blood products giant boasts net debt of 2.1 times EBITDA, and its annual interest expense is covered 8.5 times by its trailing twelve months of EBIT which is growing at about 31 percent each year. This consistent medium-term earnings growth appeals to fixed income investors because it supports CSL’s strong balance sheet and its A- credit rating, which is equivalent to the credit quality of a tier 2 banking institution in Australia.

CSL’s diversified global funding base reflects the credit quality of the Group and which is enhanced by having a significant proportion of its trade receivables and transaction counterparties being government-owned or government-backed hospitals. The Group’s funding activities are of such a scale that it has a 100 percent owned specialist financing arm in the UK that raises corporate debt which is fully guaranteed by the CSL parent entity. Known as CSL Finance Plc, this financier also arranges currency and interest rate hedges on behalf of the CSL Group.

The Future

The depth and flexibility of CSL’s corporate debt funding capability is testimony to its long-term financial strength and earnings growth prospects, in that global investors are willing to fund the Group’s balance sheet for terms out to 30 and 40 years at interest rates less than that charged by banking institutions.

CSL’s disciplined financial management and increasing global demand for its product portfolio which is delivering double-digit earnings growth over the medium-term points to further share price appreciation in the decade ahead.