Verizon Debuts $5.4 Billion of Bonds in Europe as Yields Decline

Verizon Communications Inc. is following the biggest corporate bond in history with a $5.4 billion deal in euros and pounds as the cost of borrowing in Europe relative to the U.S. approaches the lowest in five years.

Verizon is selling eight- and 12-year bonds in euros, and 20-year notes in pounds after issuing $49 billion of debt last year. The average yield on investment-grade corporate bonds in euros is 1.24 percentage points less than comparable dollar notes, according to Bank of America Merrill Lynch index data.

Verizon is set to complete a $130 billion buyout of its wireless joint venture with Vodafone Group Plc in a deal partly funded by September’s record bond sale. The second-biggest U.S. phone carrier follows American food producer Cargill Inc. selling bonds in Europe this week amid speculation the European Central Bank will keep interest rates low to revive the region’s economic recovery.

“Non-European companies have been hitting European credit markets because it ticks a number of boxes for them including lower borrowing costs and diversity of funding,” said Harpreet Parhar, a credit strategist at Credit Agricole SA in London. “A more positive market tone yesterday and today has tempted issuers back into the primary market, particularly as we don’t know how long this calm will last.”

The cost of insuring corporate bonds against losses fell for a second day, with the Markit iTraxx Europe index of credit-default swaps on 125 investment-grade companies dropping 0.6 basis point to 81 basis points at 1:52 p.m. in London, the lowest since Jan. 30.

Verizon Pricing

New-York based Verizon is selling 1.75 billion euros ($2.4 billion) of 8-year bonds that will be priced to yield 88 basis points more than the mid-swap rate and 1.25 billion euros of 12-year notes at a spread of 118 basis points, according to the person with knowledge of the deal. It’s also marketing 850 million pounds ($1.4 billion) of 20-year bonds to yield 145 basis points more than U.K. government debt.

Verizon will use the proceeds from selling the bonds to finance its acquisition of Vodafone’s stake in Verizon Wireless, according to an offer document for the securities. Bob Varettoni, a spokesman for Verizon, declined to comment further.

Also in credit markets today, Urenco Ltd. is selling 750 million euros of bonds maturing in February 2021 to yield 113 basis points more than swaps, another person said. The Buckinghamshire, England-based uranium processor is also offering to buy back its 500 million euros of 5.375 percent notes due 2015 to manage its debt maturities.

Loewen Play GmbH, the German amusement arcade operator owned by AXA Private Equity, is debuting 235 million euros of seven-year high-yield bonds. The notes, which will pay a coupon of about 8.25 percent, are rated B2 or five steps below investment grade by Moody’s Investors Service, according to a person familiar with the matter.

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