To fund its acquisition of Cerner, Oracle Corp. has sold $7 billion of its debt in bonds.

Announcing its intention to buy Cerner in December 2021, Oracle paid $28 billion in June for the medical-records system provider, making the deal its largest acquisition to date. The purchase included Cerner’s controversial Millennium EHR system for Veterans Affairs hospitals.

Oracle sold bonds in as many as four parts, with the longest portion being a 30-year note that yields 2.55% above Treasuries after earlier discussions of about 3.1%, a person familiar with the matter told Bloomberg News. The source requested anonymity due to the private nature of the matter.
News of the sale led Fitch Ratings to downgrade the company’s credit rating on November 7, from from BBB+ to BBB. As recently as 2020, the company had a high A rating but following the Cerner deal, it was warned that it “could flirt” with an investment grade as low as BBB-, according to Baylor Lancaster-Samuel, vice president of fixed income at Amerant Investments.

"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," he emailed Bloomberg.

Fitch, Moody’s and the S&P Global Ratings warned Oracle in December 2021 that they would possibly downgrade its investment-grade rating if it financed the Cerner deal using debt, reported Bloomberg.

Cerner initially used $15.7 billion of a so-called bridge loan debt to fund the acquisition, later borrowing about $4.4 billion under a term loan agreement to reduce the bridge facility.

The proceeds from the bond sale will prepay borrowings under the bridge sale. Together, the bond sale and the added proceeds of the term loan will leave about $3 billion remaining to fund in the bond market from the bridge loan.

The bond sale is being managed by Citigroup Inc., Bank of America Corp., Goldman Sachs Group Inc., HSBC Holdings Plc and JPMorgan Chase & Co., according to Bloomberg’s source.

Oracle has been tasked with fixing numerous problems associated with Cerner’s Millennium EHR system. The VA recently revealed that ongoing issues over the past two years may have impacted the care of 41,500 veterans.

Back in June, it halted all new installments until 2023 to address the flaws.

Oracle has pledged to Congress that it will rewrite the EHR system as a cloud-based application that will fix the problems.

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