The meetings in Europe, which were scheduled to begin tomorrow, were arranged to discuss Verizon’s acquisition of Vodafone Group Plc (VOD)’s 45 percent stake in Verizon Wireless, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it. The cost of insuring European company debt against losses fell 1.2 basis points to 98 basis points at 4:13 p.m. in London, the lowest in four weeks.
The second-biggest U.S. telephone carrier is seeking to finance the $130 billion purchase of the most profitable U.S. wireless carrier. It plans to raise more than one third of that amount by selling bonds in dollars, in a deal set to be almost triple Apple Inc.’s record $17 billion issue in April.
“We are surprised that the company has been able to complete the entire financing in one go but if the cash is available it makes sense to get it done now,” Aengus McMahon, a London-based analyst at ING Groep NV, wrote in a client note.
Jim Gerace, a Verizon spokesman, declined to comment on the meetings in Europe.
In credit markets today, Telefonica SA is debuting hybrid bonds to help fund its acquisition of a controlling stake in Royal KPN NV’s E-Plus German wireless unit. Spain’s biggest phone company will issue two portions of notes in euros through its Telefonica Europe BV (TEF) unit, according to a person familiar with the matter.
Madrid-based Telefonica plans to sell 1.125 billion euros ($1.5 billion) of undated bonds that can be bought back by the company in September 2018 and will yield 6.5 percent, said the person, who asked not to be identified because they’re not authorized to speak about the sale. It also plans to issue 625 million euros of notes to yield 7.625 percent that can be called in September 2021.
“Telefonica’s new hybrid instruments provide some new issue concession,” said Umang Vithlani, head of credit at Fideuram Asset Management in Dublin, which oversees 3 billion euros. “The funding window recently opened and investor appetite is there after a very quiet summer and volatility in June.”
Hybrid securities, including notes from KPN and Telekom Austria AG (TKA), yield an average 6 percent, Bank of America Merrill Lynch index data show. Non-financial companies have sold a record 23.5 billion euros of the bonds combining elements of debt and equity in Europe this year, according to data compiled by Bloomberg.
The notes allow companies to borrow without putting their credit grade at risk because ratings firms typically count 50 percent of the bonds as equity, reducing their view of a company’s indebtedness.
Telefonica’s hybrid bonds have been rated Ba1 by Moody’s Investors Service, one step below investment grade.
French carmaker Renault SA (RNO) sold 600 million euros of five-year bonds to yield 225 basis points more than the mid-swap rate, according to data compiled by Bloomberg.
Polish Television Holding BV, the owner of the nation’s second-largest television network, plans to price 300 million euros of payment-in-kind toggle notes yielding 11 percent. PIK toggle notes give the borrower the option of paying coupons with cash or more debt.
To contact the reporter on this story: Katie Linsell in Madrid at email@example.com