AT&T Sells $6 Billion of Bonds in Effort to Refinance Debt

AT&T Inc., the second-largest U.S. wireless carrier, sold $6 billion in bonds Friday to partially pay down its $126-billion debt load.

The Dallas-based company sold the debt in four parts, with the longest portion -- $1.5 billion of 5.65 percent 31-year bonds -- yielding 2.9 percentage points more than comparable government securities, according to data compiled by Bloomberg. That’s down from an initial estimate of 2.95 percentage points, according to a person familiar with the matter who asked not to be identified because they weren’t authorized to speak about it publicly.

AT&T will participate in a wireless spectrum auction in March and may use part of the new debt to finance its bid, said Stephen Flynn, an analyst at Bloomberg Intelligence. In 2015, AT&T acquired $89 billion of spectrum, pay-TV and Latin American assets, requiring $37 billion of cash payments and $20 billion of debt. About $68 billion of AT&T’s bonds and term loans come due by 2024, according to data compiled by Bloomberg.

The company, which reported a profit of 63 cents per share earlier this week that was in line with analyst estimates, is working on lowering its debt levels in the next few years, chief executive officer Randall Stephenson said on a conference call Tuesday.

‘Constant Presence’

“AT&T may be a constant presence in the new issue market over the next years,” Flynn said. “It’s one of the largest non-financial issuers in the market. It has large debt maturities upcoming, and it makes sense for them to enter the market when the window is open.”

CreditSights Inc. downgraded AT&T to underperform earlier this week. The company’s credit profile may be at risk over the next six to 12 months as AT&T faces risks related to new-issue supply and volatility in Latin America, CreditSights analysts led by Chris Ucko wrote in a Jan. 27 note.

“AT&T bonds could see more near-term volatility, and there is room for underperformance,” Ucko wrote. “We recommend lightening up exposure and switching into Verizon. There may be better new-issue opportunities to get back in the mix on AT&T as the year progresses.”

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