Vodafone Credit Investors Relieved as Liberty Talks Scrapped

  • Vodafone CDS best-performing in the Markit iTraxx Europe index
  • Bonds issued by Liberty Global units fell to records

The cost of insuring Vodafone Group Plc’s debt against default fell the most in almost four months after the company ended assets-exchange talks with John Malone’s pay-TV giant Liberty Global Plc.

Vodafone five-year default swaps are quoted at about 98 basis points, compared with 105 on Friday, while bonds of Liberty Global units fell to records after news the talks had failed. Vodafone’s five-year credit-default swap is the best-performing so far Monday in the Markit iTraxx Europe index, which is based on the credit-default swaps of 125 investment-grade European companies.

The transaction stalled on differences over the value of Liberty’s Virgin Media unit in the U.K. and businesses including each company’s operations in Germany, according to a person familiar with the talks who asked not to be named because the matter is private. Earlier this year, the companies were discussing a range of potential transactions including an asset swap, combining their western European businesses, or an outright merger, people familiar with the matter said at the time.

While asset swaps between the two companies would have allowed both to compete more effectively in converged telecommunications market, a full acquisition was "unlikely due to the lack of overlap for large portions of their operations," Moody’s Investors Service said in an e-mailed statement. A merger would have been complex because of "the high amount of debt relative to their ratings that the two companies already carry."

Liberty Global and Vodafone together have more than $80 billion in annual revenue, almost $125 billion in market capitalization and about $100 billion in debt. Malone said in an interview this month that the companies weren’t able to overcome a deadlock in the talks he described as a "tennis match" of ideas. The billionaire in June said Vodafone doesn’t take enough risks with its cash.

Bonds of Liberty Global units fell to records. Virgin Media Finance Plc, which was bought by Liberty Global in 2013, saw its 460 million euros ($515 million) of January 2025 bonds fall 2.9 cents to 92.8 cents on the euro, the lowest since they were issued earlier this year, according to data compiled by Bloomberg. The 700 million euros of German unit Unitymedia GmbH’s January 2027 bonds declined 5.1 cents to a record 84.4 cents.

Vodafone is rated BBB+, the third-lowest investment grade, at Fitch Ratings and Standard & Poor’s, and an equivalent Baa1 at Moody’s. All three ratings have stable outlooks. Liberty Global is rated Ba3, three steps into junk status, with a stable outlook, at Moody’s.

Vodafone shares fell as much as 4.6 percent and dropped 3.7 percent to 209.7 pence at 2:11 p.m. in London. Liberty Global lost 0.5 percent to $47.96 in New York on Sept. 25.

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