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Telefonica’s Record-Low Borrowing Costs Spur Talk of Bond Sale

Nov. 15 (Bloomberg) -- Telefonica SA’s borrowing costs fell to the lowest ever compared with the Spanish government, stoking speculation the time is ripe for the nation’s biggest phone company to sell bonds again.

“Telefonica is permanently monitoring the market to find windows of opportunity,” said Miguel Angel Garzon, a Madrid-based spokesman for the phone company. Arnaud Colombel at La Postale Asset Management in Paris, which oversees 130 billion euros ($166 billion) of assets including Telefonica bonds, said “it could make sense” for the company to issue.

The yield on Telefonica’s 1 billion euros of 3.661 percent bonds due September 2017 dropped to 127 basis points below comparable government debt as of 1:20 p.m. in Madrid, close to a record 128 basis-point gap on Nov. 8, according to Bloomberg prices. The Spanish phone company’s borrowing costs were higher than the sovereign’s as recently as September.

Telefonica’s access to debt markets is improving amid a credit rally spurred by the European Central Bank’s support for regional governments, and since the Spanish company offloaded assets to reduce debt. The Madrid-based telecoms provider last issued bonds on Oct. 5, when it sold 1.2 billion euros of 4.71 percent senior notes due January 2020, data compiled by Bloomberg show.

“Telefonica will continue to take advantage of windows of opportunity to continue with its good progress made so far to refinance its debt” through to “the end of 2014,” Carlos Winzer, an analyst at Moody’s Investors Service in Madrid, said in an interview. The ratings company grades Telefonica at Baa2, two levels above junk status and equivalent to Standard & Poor’s BBB assessment.

The company is “consistent in improving its financial flexibility,” Finance Chief Angel Vila said in an interview yesterday.

To contact the reporters on this story: Manuel Baigorri in Madrid at; Esteban Duarte in Madrid at

To contact the editors responsible for this story: Paul Armstrong at; Kenneth Wong at

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