Verizon Communications Inc. (VZ) is said to be seeking $60 billion in financing to back its potential purchase of Vodafone Group Plc (VOD)’s stake in its wireless unit as borrowing costs for investment-grade companies climb from historic lows.
Verizon is in discussions about an acquisition of Vodafone’s 45 percent stake in Verizon Wireless for about $130 billion, according to people with knowledge of the matter. The New York-based company is negotiating with several banks to raise about half that amount, said two of the people, who asked not to be named because the talks are private.
Speculation that the Federal Reserve will taper its unprecedented stimulus measures as soon as September might make it more expensive for companies to sell bonds. The average yield investors demand to hold the debt of companies with A ratings in the U.S. rose to 3.08 percent, after falling to a record low of 2.3 percent in May, according to Bank of America Merrill Lynch’s Single-A US Corporate index, which counts Verizon among its members.
“Given the risk of rising interest rates, it adds to the sense of urgency for Verizon to secure this asset that’s growing in value,” Brian Zinser, a New York-based credit strategist at Mizuho Securities Co, said in a telephone interview. “It’s becoming clear that there may be a limited window to be able to do a transaction of this size, which will likely require financing across both equity and debt capital markets.”
In a statement, Newbury, England-based Vodafone said there’s “no certainty that an agreement will be reached” as it holds discussions with Verizon. Bob Varettoni, a spokesman for Verizon, declined to comment.
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