Bloomberg News

Verizon to Meet Bond Investors Before $50 Billion Fundraising

September 06, 2013

Verizon Communications Inc. (VZ:US) plans to meet bond investors in Europe and the U.S. next week as the carrier seeks to raise as much as $50 billion to buy a stake in its wireless unit from Vodafone Group Plc. (VOD)

The company hired banks to arrange the meetings starting on Sept. 9 in the U.S. and Sept. 13 in Europe, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it. Enel SpA (ENEL), Italy’s biggest utility, and Norwegian energy producer Statoil ASA (STL) were among non-financial companies selling 12.5 billion euros ($16.4 billion) of bonds this week in the busiest start to September for issuance on record, according to data compiled by Bloomberg.

The deal triggered speculation a bond sale from Verizon may exceed Apple Inc.’s record $17 billion issue in April and any transaction in euros will be the company’s first. Proceeds would help fund its acquisition of Vodafone’s Verizon Wireless stake for $130 billion, giving it full control of the most profitable U.S. mobile-phone carrier in the biggest buyout in more than a decade.

“It will be the company’s inaugural deal in Europe so it may have to pay a bit of a new-issue premium to entice investors,” said Sam Morton, a credit analyst at Mizuho International Plc in London. “Verizon needs to do a significant portion of financing over stages.”

Telefonica Hybrids

Average yields on high-grade bonds rose 15 basis points this week to 2.2 percent, the highest in 11 months, Bloomberg index data show. A benchmark gauge of credit risk fell during the period, with the Markit iTraxx Europe index of credit-default swaps on 125 companies with investment-grade ratings dropping two basis points to 105 basis points.

Also in the new issue market, Telefonica SA (TEF) will meet investors for a possible debut sale of hybrid bonds in euros through its Telefonica Europe BV unit. The money will help fund the biggest Spanish phone company’s acquisition of a controlling stake in Royal KPN NV’s E-Plus German wireless unit for 8.5 billion euros, according to a Moody’s Investors Service report.

Hybrid securities allow companies to borrow without putting their credit grade at risk because ratings firms typically count 50 percent of the bonds as equity, reducing their view of a company’s indebtedness. Enel and America Movil SAB (AMXL) are among non-financial companies that sold a record 23.5 billion euros of the securities in Europe this year, according to data compiled by Bloomberg.

“The hybrid market is very hot at the moment,” saidGeorg Grodzki, head of credit research at Legal & General Investment Management in London. “Even companies which don’t seem to have an acute need for bolstering their equity base or credit ratios seem to be tempted by the idea of raising affordable funding and cushioning their credit rating.”

To contact the reporters on this story: Natasha Doff in London at ndoff@bloomberg.net; Katie Linsell in Madrid at klinsell@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net


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Companies Mentioned

  • VZ
    (Verizon Communications Inc)
    • $50.18 USD
    • -0.17
    • -0.34%
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