Corporate Debt Costs Decline Before Verizon Meets Bond Investors
Corporate borrowing costs dropped from the highest in almost a year in Europe and credit risk fell in the U.S. before Verizon Communications Inc. (VZ) meets investors to arrange what may be the biggest bond sale in history.
The average yield on investment-grade notes in euros declined to 2.12 percent from an 11-month high of 2.19 percent reached Sept. 5, Bloomberg index data show. The cost of insuring against losses on company debt dropped to a two-week low, with the Markit CDX North America Investment Grade index falling two basis points to 80 basis points at 10:29 a.m. in New York.
“The deal is huge,” said Jonathan Pitkanen, the London-based head of credit research at Threadneedle Asset Management Ltd. “The market expects the company will issue at least $25 billion initially, including up to $10 billion equivalent in euros and pounds.”
Verizon is due to begin meeting investors in the U.S. today and in Europe on Sept. 12 as the New York-based carrier seeks to raise as much as $50 billion to buy a stake in its wireless unit from Vodafone Group Plc (VOD), according to a person with knowledge of the matter. That would exceed Apple Inc.’s record $17 billion issue in April, while a deal in euros or pounds would be Verizon’s first in Europe.
Proceeds from the sale will fund the $130 billion stake in Verizon Wireless, giving the company full control of the most profitable U.S. mobile-phone carrier in the biggest buyout in more than a decade.
Verizon’s $1.75 billion of 2.45 percent notes due November 2022 rose 0.2 cent on the dollar to 85.3 cents, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority, pushing the yield on the securities to 4.42 percent. The price of credit-default swaps on the debt fell as much as six basis points to 86 basis points after jumping to the highest in at least four years on Sept. 6, according to data compiled by Bloomberg.
In credit markets today, Russia is selling its first international bonds since March 2012. The government is debuting seven-year securities in euros and marketing three portions of dollar-denominated notes, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it.
Fairfield, Connecticut-based General Electric Co., the world’s biggest maker of jet engines, sold 550 million pounds ($864 million) of 10-year bonds yielding 150 basis points more than U.K. government debt through its GE Capital U.K. Funding unit.
Australia Pacific Airports Melbourne Pty Ltd., the owner and operator of Melbourne Airport, is meeting investors in Europe starting Sept. 12 for a potential bond sale that would be its first in the region. Apetra NV, a manager of Belgium’s oil stocks, is also meeting bond investors in Europe starting Thursday.
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