U.S. integrated midstream infrastructure company Plains All American Pipeline on Jan. 13 priced a $1 billion investment-grade bond offering, the year's first to finance an acquisition.

Proceeds will be used to fund an $800 million purchase of Ironwood Midstream Energy Partners and hybrid shares from EnCap Flatrock Midstream, Plains All American said earlier this month.

The offering of 10-year bonds set the stage for what is expected to be a busy year of bond financing for acquisitions.

Syndicate bankers on average are expecting around $1.65 trillion of new investment-grade bonds in 2025, topping the $1.5 trillion in 2024, making this the second most prolific year for such offerings, according to Informa Global Markets.

Daniel Krieter, credit strategist at BMO Capital, said M&A could account for about 14.5% to 15.5% of total investment-grade bond volumes this year, up from about 13.5% in 2024.

A spike in Treasury yields, due to expectations of a higher-for-longer interest rate environment, could limit such debt offerings, said Richard Familetti, chief investment officer, U.S. Total Return Fixed Income, at fund manager SLC Management.

"It is likely companies may prefer to finance their M&As through a combination of debt and equity in part due to the higher costs, and also to avoid getting penalized by credit rating agencies for taking on too much debt," he said.

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