NEW YORK

Even the biggest debt-market deal of the year wasn’t nearly large enough to satisfy yield-hungry investors.

AT&T Inc drew almost three times the orders for a $22.5 billion multi-tranche deal to fund what is likely the last remaining portion of its $85.4 billion takeover of Time Warner Inc, according to a person with knowledge of the matter.

The No. 2 US wireless provider is said to have received $65 billion of orders according to the person, who asked not to be named because the deal is private. The longest portion of the offering, which may come in as many as seven parts, may be a 41-year bond that yields about 2.4 percentage points above Treasuries, down from initial talk of 2.55 percentage points, another person said.

What started as talk of a $15 billion offering ballooned as investors clamour for investment-grade deals, a trend that has pushed the extra yield investors demand over Treasuries to the lowest levels since 2014. With higher yields than those in Europe in Japan, the US has become a destination for foreign investors to park their money, a pattern that AT&T is benefiting from.

“Demand has been strong for investment-grade credit and this was a well-telegraphed deal,” said Todd Schomberg, an Atlanta-based senior portfolio manager at Invesco Ltd, who said he plans to buy some of the debt. “People were set up and waiting to buy AT&T in the new issue market.”

It would be not only largest investment-grade deal of the year, but the third largest in history behind offerings from Verizon Communications Inc and Anheuser-Busch InBev SA.

Subscriber Gains

The offering comes a day after AT&T stunned analysts and investors with a surprise wireless subscriber gain in the second quarter, proving it can hold its own in a highly competitive price war and propelling shares the most in more than eight years. Rivals Verizon and T-Mobile US Inc also reported strong results as industry-wide incentives and giveaways attract new customers.

AT&T only needs to raise about $5 billion to fund the remainder of the acquisition, according to Bloomberg Intelligence, rounding out the term loan and euro-denominated bonds it’s already sold to support the deal. With book orders of 13 times that amount, investor demand and the strong credit market proved lucrative for the company to issue more, said Bloomberg Intelligence analyst Stephen Flynn.

“The opportunity was there for them to sell it and they have such a large debt load with so much debt rolling over every year,” Flynn said, noting that AT&T has about $10 billion of debt maturing next year. “If they can get ahead of that and take advantage of where the markets are, it makes sense.”

AT&T’s credit ratings remain on review for downgrade from both S&P Global Ratings and Moody’s Investors Service pending the completion of the deal, which would add more leverage to its already $133 billion debt load.

‘Last Chance’

The deal “will take them out of the unsecured debt market most likely for the rest of the year,” Schomberg said. “This is your last chance to really buy a large M&A-type deal from AT&T.”

AT&T previously came to market with a 7 billion euro ($8.2 billion) offering and a 1 billion pound ($1.3 billion) sale in June for the acquisition. It also received a $10 billion term loan for the deal last year. AT&T lined up $40 billion of bridge financing, a type of borrowing that’s typically replaced by long-term debt in the bond market, in October. It cut the bridge to $30 billion after selling the loan.

Bank of America Corp, Goldman Sachs Group Inc, JPMorgan Chase & Co., Mitsubishi UFJ Financial Group Inc and Mizuho Financial Group Inc are managing the sale, AT&T said in a statement.

‘Pretty Fortuitous’

“It’s a pretty fortuitous time for them,” said Tom Murphy, a Minneapolis-based money manager at Columbia Threadneedle. “The market from a technical standpoint was pretty well set up for this transaction to come.”

In October, Dallas-based AT&T agreed to acquire Time Warner, which is headquartered in New York, in a cash-and-stock deal. The acquisition would form a media and telecommunications empire that owns many of the movies and TV shows it pumps through to wireless, internet and pay-TV subscribers.

The proposed merger has raised concerns from the Department of Justice as to whether AT&T would use its pull to unfairly advantage its own programming. US antitrust officials have already started talking to representatives from both companies about possible terms that would secure approval of the deal, according to people familiar with the discussions.