Bloomberg News

AT&T, Freeport Lead February Bond Offerings to Fastest Start

February 09, 2012

(Updates with sale details in second paragraph.)

Feb. 8 (Bloomberg) -- AT&T Inc., the second-largest U.S. wireless-service provider, and miner Freeport-McMoRan Copper & Gold Inc. led the fastest start on record for monthly bond sales, stoked by yields at almost all-time lows.

AT&T and Freeport, the world’s largest publicly traded copper producer, each sold debt worth $3 billion. Dallas-based AT&T offered $1 billion each of three-, five- and 10-year notes. The 10-year bond was priced at 105 basis points, or 1.05 percentage points more than similar maturity Treasuries.

Freeport’s three-part offering included $2 billion of 10- year notes, and $500 million each of three-year and five-year notes. Proceeds from the Phoenix-based company’s offering will be used to redeem debt on its 8.375 percent notes maturing in 2017, the company said in a statement.

“Investors are taking this opportunity with a lull in the European situation,” said Jody Lurie, a corporate credit analyst at Janney Montgomery Scott LLC in Philadelphia. “They were nervous at the end of the year and didn’t want to spend their money and now they can put the cash to use.”

Measures of corporate credit risk have eased as concerns diminish that Europe’s fiscal crisis may spread. The Markit CDX North America Investment Grade Index of credit-default swaps, which typically falls as investor confidence improves and rises as it deteriorates, touched 94.3 basis points on Feb. 6, the lowest level since August.

Wells Fargo, HSBC

Wells Fargo & Co., Aflac Inc. and HSBC USA Inc. also sold benchmark bonds, which took the total debt expected to be raised today to at least $17.8 billion. Including today’s sales, corporate bond issuance this month will reach $66.1 billion, the most for the first eight days of any month, according to data compiled by Bloomberg extending back to 1999.

Near Zero Fed

New issues have been on the rise since the Federal Open Market Committee announced its decision on Jan. 25 to keep interest rates near zero through at least late 2014. “If investors take Mr. Bernanke at his word and believe rates will remain low for an extended period, corporate bond yields, particularly financials, offer an attractive pick-up versus Treasuries,” Marc Pinto, head of corporate bond strategy at Susquehanna International Group LLP in New York said in an e- mail.

AT&T last issued debt in August 2011, selling $5 billion in a three-part offering of five-, 10- and 30-year senior unsecured notes, according to Bloomberg data.

Yields on investment-grade corporate bonds in the U.S. have fallen to 3.54 percent, near the record low 3.45 percent reached Aug. 4, according to Bank of America Merrill Lynch index data.

Investors are accepting coupons on new issues at all-time lows, Bloomberg data show. On Feb. 1, International Business Machines Corp. obtained a record interest rate of 0.55 percent on its $1.5 billion of three-year notes, while Procter & Gamble Co. sold 10-year notes at 2.3 percent.

T-Mobile Bid

AT&T is tapping the bond market for the first time after it dropped a $39 billion bid to acquire Deutsche Telekom AG’s T- Mobile USA in the face of opposition from the U.S. Justice Department. The acquisition would have helped AT&T vault over Verizon Wireless to become the largest U.S. wireless provider.

AT&T’s bond sale was managed by BNP Paribas SA, Credit Suisse Group AG and Deutsche Bank AG. The company is rated A2 by Moody’s Investors Service and A- by Standard & Poor’s.

--With assistance from Tim Catts in New York. Editors: John Parry, Mitchell Martin

To contact the reporter on this story: Sridhar Natarajan in New York at snatarajan15@bloomberg.net;

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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