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Verizon Set to Pay 20% Premium for Bonds Linked to Tender Offer

Verizon Communications Inc., the phone company that issued bonds last week to help fund a tender offer for its debt, plans to pay a 20 percent premium to retire $4.1 billion of the securities.

Verizon will pay investors almost $5 billion for notes that mature from 2016 to 2018 and carry coupons as high as 8.75 percent, the New York-based company said today in a statement. Verizon’s initial offer was for as much as $8.2 billion of bonds across eight securities. The company issued $4.5 billion of notes in five parts on March 10.

The transaction helps to extend Verizon’s maturity profile by using proceeds from new bonds due as late as 2034 to redeem the higher-cost debt, including $564 million of its 8.75 percent notes due November 2018. Verizon is paying $746 million to redeem that portion, according to the statement.

“They’re really chiseling away at that maturity wall, and willing to pay up now to mitigate the risk down the road when interest rates are going to be higher and they won’t be able to refinance at such advantageous rates,” said Erich Marriott, a credit analyst at Bloomberg Industries.

Verizon expects to pay bondholders tomorrow, according to the statement.

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