Arab Today, arab today verizon launches record 49bn bond sale
Last Updated : GMT 18:03:12
Arab Today, arab today
Arab Today, arab today

Verizon launches record $49bn bond sale

Arab Today, arab today

Arab Today, arab today Verizon launches record $49bn bond sale

New York - AFP

Verizon smashed records with a blockbuster $49 billion bond sale Wednesday as it gathers financing to buy Vodafone\'s stake in their Verizon Wireless joint venture. The historic deal is larger than the gross domestic product of Tunisia or Lebanon and dwarfs by four times Apple\'s $17 billion corporate bond sale in April, the largest in history. Demand was \"very strong,\" said Adrian Miller, director at GMP Securities, a broker-dealer. \"Despite its size, I think it was priced to move and indeed it did.\" For Verizon Communications, the offering came amid expectations of a further rise in long-term interest rates, which have been climbing from historical lows in recent months after the Federal Reserve signaled it would cut back its aggressive bond-buying program. The Fed taper of its $85 billion a month asset-purchase program, aimed at holding down long-term interest rates, is expected this year, and could come as soon as next week\'s monetary policy meeting. A Verizon spokesman said the company could not comment on bond offerings before they close. The bond sale comes as Verizon seeks to finance its $130 billion buyout of British partner Vodafone\'s 45 percent stake in Verizon Wireless, the largest US wireless provider. The partners announced the deal last week. The Verizon offering generated more than $100 billion worth of orders, according to a person familiar with the deal. Paul Baudoin, senior vice president of bond trading at DA Davidson, said the bond deal was timed to take advantage of lower interest rates. \"Historically spreads and interest rates are low,\" Baudoin said. \"They are taking advantage of the market conditions to grow the deal.\" Verizon is paying a yield of 5.185 percent on a 10-year bond, 225 basis points above the US 10-year Treasury yield, according to a document on the offering. The deal offered increments of three-, five-, seven-, 10-, 20- and 30-year bonds. The biggest category was $15 billion in 30-year bonds at a 6.510 percent yield. Paying more than 5 percent on a 10-year bond is \"expensive,\" said Gregori Volokhine, president of Meeschaert Capital Markets. Apple paid just 75 basis points above the yield on 10-year US Treasuries earlier this year, Volokhine said. \"Current market conditions aren\'t as good as they were six months ago\" for Verizon, Volokhine added. \"We remain in a low interest rate/low growth environment in which investors value yield and quality, and that is what Verizon offers,\" said New York investment banker Marshall Sonenshine. Fitch Ratings reaffirmed its ratings outlook on Verizon as \"stable,\" saying the bond plan reduces the risk of rising interest rates and removes the chance of a $10 billion termination fee Verizon would have to pay Vodafone if the deal fell through because of insufficient financing. Verizon shares edged up 0.1 percent to $46.52. Verizon plans to issue $60.2 billion in common stock to finance the deal and is expected to raise a similar sum in debt. Verizon has said it aims to pay off the debt as quickly as possible. Chief financial officer Fran Shammo said in a September 3 conference call that the company expected to generate enough free cash flow with the Vodafone purchase to return to its normal debt level and garner its traditional \"A-\" credit rating \"within a reasonable amount of time, somewhere between four and five years.\" S&P lowered Verizon\'s credit rating from \"A-\" to \"BBB+\" on news of the deal, saying the increased debt was indicative of a \"significant\" financial risk profile.

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