Broadcom (AVGO.US) borrowed $5 billion in the U.S. investment-grade bond market on Monday to refinance part of the loans it obtained for its $69 billion acquisition of VMware (VMW.US).

Broadcom sold the bonds in three tranches, according to a person familiar with the matter. The longest tranche yields 0.95 percentage points above U.S. Treasuries, following preliminary talks for a yield of 1.25 percentage points above Treasuries.

The planned debt sale comes more than seven months after Broadcom completed its acquisition of VMware and nearly a year after it secured up to $28.4 billion in new debt commitments to finance the acquisition and replace a short-term loan it took out while it awaited regulatory approval.

A document from August last year showed that the committed financing was divided into three parts: $10.7 billion in A-2 financing, $10.7 billion in A-3 financing and $7 billion in A-5 financing. According to the term loan credit agreement, Broadcom will use the proceeds from the sale to prepay part of the A-2 loan and use it for general corporate purposes, so there is still at least $23.4 billion in debt to be refinanced.

Senior credit analyst Robert Schiffman said on Monday that Broadcom may be issuing bonds now to "extend its duration slightly" while providing the ability to continue deleveraging in the medium term. With risk premiums near historic lows and yields continuing to fall, bond issuers have also taken advantage of lower funding costs recently.

Bank of America, BNP Paribas and HSBC Holdings led the bond sale, the person said.

Broadcom’s initial $32 billion bridge loan for its acquisition of VMware in 2022 was the largest M&A financing package in more than a year. Prior to that, banks had already committed $41.5 billion for the spinoff and merger of AT&T’s (T.US) media business with Warner Bros. Discovery (WBD.US).

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