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Verizon Said to Plan Record Bond Sale of Up to $49 Billion

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Verizon Marketing Record Bond Sale as Relative Yields Rise
Verizon Communications Inc. is seeking as much as $50 billion in notes for a $130 billion transaction to acquire full control of Verizon Wireless, the most profitable U.S. mobile carrier, from Vodafone Group Plc. Photographer: David Paul Morris/Bloomberg

Sept. 10 (Bloomberg) -- Verizon Communications Inc. plans to sell $45 billion to $49 billion of bonds in an eight-part offering as soon as tomorrow that would be the largest ever, according to people with knowledge of the transaction.

The second-biggest U.S. telephone carrier is planning to sell fixed-rate debt with maturities ranging from three to 30 years as well as two portions of floating-rate securities, said one of the people, who asked not to be identified because terms aren’t set. The transaction would be more than twice the size of Apple’s Inc.’s unprecedented $17 billion issue in April, according to data compiled by Bloomberg.

Verizon is poised to pay a premium for the size of its sale, intended to finance a $130 billion purchase of Vodafone Group Plc’s 45 percent stake in Verizon Wireless. A 10-year portion may pay a relative yield that’s 57 basis points more than investors demanded yesterday for a benchmark Verizon bond due November 2022.

“With a deal this size they just want to get it done,” Jody Lurie, a corporate credit analyst at Janney Montgomery Scott LLC in Philadelphia, said in a telephone interview. “They would rather jump in now versus waiting a week and finding that rates are at a totally different level.”

International Bonds

In addition to the dollar offering, Verizon may sell debt denominated in euros, British pounds and possibly yen, analysts at Societe Generale SA wrote in a Sept. 8 report.

The offering is being managed by Barclays Plc, Bank of America Corp., JPMorgan Chase & Co. and Morgan Stanley, Verizon said in regulatory filings.

Bob Varettoni, a Verizon spokesman, declined to comment on the sale.

Verizon is also seeking $14 billion of loans to help back the deal, according to a person with knowledge of that transaction. A $6 billion term loan due in three years will pay interest at 1.375 percentage points more than the London interbank offered rate, while a $6 billion term loan maturing in five years will have a rate of 1.5 percentage points more than Libor, said the person, who asked not to be identified citing lack of authorization to speak publicly about the matter.

Libor, the rate at which banks say they can borrow from each other, was set today at 25.59 basis points. A basis point is 0.01 percentage point.

Tapering ‘Fear’

Verizon may sell about $13 billion to $15 billion of fixed-and floating-rate notes maturing in three and five years, one of the people said. The three-year, fixed-rate notes may yield about 165 basis points more than similar-maturity Treasuries and the five-year debt may pay a spread of about 190 basis points.

The company may also sell about $15 billion of seven-year and 10-year securities paying spreads of about 215 basis points and 225 basis points, the person said. It may also sell about $18 billion to $20 billion of 20- and 30-year bonds yielding about 250 and 265 basis points more than benchmarks.

“The fear is tapering begins and rates go much higher,” Andrew Brenner, head of international fixed income for National Alliance Capital Markets in New York, said in an e-mail. “They recognize they have a window to get the bonds done.”

To contact the reporter on this story: Sarika Gangar in New York at sgangar@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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