October 1, 2022

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Nasdaq borrows $1.9 billion to buy financial crime-fighting platform Verafin

Window reflections are seen outside the Nasdaq stock exchange in New York.


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Nasdaq Inc. isn’t only about herding unicorns to go public on its popular stock-trading platform.

The almost-50-year-old company also wants to beef up its capabilities as an international financial crime-fighter, with its planned purchase of Canadian antifraud and money-laundering detection platform Verafin for $2.75 billion.

To help fund the all-cash purchase, Nasdaq
NDAQ,
+0.54{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}
on Monday borrowed $1.9 billion in the investment-grade U.S. corporate bond market through a three-part debt issuance.

Its 10-year slug of bonds cleared at a spread of 75 basis points above risk-free Treasurys
TMUBMUSD10Y,
0.897{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb},
after initially being pitched to investors at about 110 basis points above the same benchmark, according to a person with direct knowledge of the dealings.

Spreads are the level of compensation that investors receive on a set of bonds above a risk-free benchmark, with lower spreads signaling demand from investors or higher appetite for risk.

Corporate bond spreads have returned to near-record lows this year with the help of support from the Federal Reserve. Stocks also have recently set a string of all-time records, with the Nasdaq Composite
COMP,
-0.23{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}
on Monday booking its 49th record close of the year, even as the Dow
DJIA,
+0.16{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}
and S&P 500
SPX,
-0.13{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}
fell as Washington further delayed additional pandemic aid.

On a yield basis, the new 10-year Nasdaq bonds priced to return 1.69{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} to investors, while Nasdaq, which is rated Baa2 by Moody’s Investors Service and BBB by S&P Global, saved about 35 basis points as spreads narrowed.

Nasdaq declined to comment on the funding.

For its part, Verafin already allows a group of large, global investment banks to collaborate on its platform to help detect, investigate and report financial crimes, including fraud and money laundering, under section 314(b) of the USA Patriot Act.

The nearly 20-year-old Patriot Act grants the government broad surveillance powers, but it also can be used by international banks and local, state and federal authorities to help thwart suspected terrorists and money launderers. More recently, it has been enlisted to help detect criminal activity tied to the COVID-19 pandemic.

Nasdaq said it plans to expand Verafin’s platform to its roster of nearly 250 banks, exchanges, broker-dealers, regulators and other clients.

“Together with Verafin’s founders and employees, we look forward to building Nasdaq into a global leader in anti-financial-crime management solutions,” said Adena Friedman, Nasdaq’s president and chief executive officer, in November, as part of the deal’s announcement.

The acquisition remains subject to relevant regulatory approvals but is expected to close in the first quarter of 2021.