UPDATE 4-Drugmaker Roche sells record $16 bln bond issue

(Recasts lead. Updates with bond sale, record size)

By Walden Siew and Jane Baird

NEW YORK/LONDON, Feb 18 (Reuters) - Swiss drugmaker Roche on Wednesday sold a record $16 billion in debt to help finance its $42 billion hostile offer for Genentech, drawing strong demand from investors hungry for high-quality bonds.

The sale was the largest U.S. dollar-denominated corporate bond sale in history, topping the $10.99 billion sold by General Electric Capital Corp in 2002, according to Thomson Reuters data.

The proceeds will help Roche (ROG.VX) finance the purchase of the 44 percent of U.S. biotechnology company Genentech DNA.N that it does not already own, as well as refinance existing Genentech debt, a source close to the company said.

The sale was originally marketed at about $10 billion. The increase in the size of the deal suggests some pent-up demand in the midst of a year-long U.S. recession and global credit crisis. The sale would be the biggest health-care bond sale ever, according to Thomson Reuters data.

"It's a massive issue, they're highly rated and they're coming at prices which in more normal times would be exceedingly wide," said Scott MacDonald, head of research at Aladdin Capital in Stamford, Connecticut.

Roche is rated "Aa1" the second-highest rating, by Moody's Investors Service, and "AA-minus," or two notches lower by Standard & Poor's. Moody's has Roche on review for a downgrade.

"In these kinds of markets these are the kinds of issuers that can issue," MacDonald said. "You have a company coming in and doing $16 billion, double-A rated and trading over 300 basis points. I don't think that's business as usual; it's a sign of the times."