Verizon Communications Inc. (VZ:US) paid banks including JPMorgan Chase & Co. (JPM:US) and Morgan Stanley $265.3 million in fees to underwrite the second-biggest U.S. telephone carrier’s record $49 billion bond sale yesterday.
The fees amount to 0.541 percent of the funds raised, exceeding the average 0.486 percent paid on offerings of investment-grade U.S. corporate bonds this year, data compiled by Bloomberg show. The four leading underwriters, also including Barclays Plc (BARC) and Bank of America Corp. (BAC:US), each underwrote 15.7 percent of the sale, according to a regulatory filing, and would get $41.6 million apiece if commissions are divided in proportion to firms’ involvement.
The eight-part offering, which includes $15 billion of 30-year bonds, is helping to fund New York-based Verizon’s $130 billion buyout of partner Vodafone Group Plc. (VOD)’s 45 percent stake in the largest and most profitable U.S. wireless carrier, Verizon Wireless. The sale is more than double the previous issuance record of $17 billion from Apple Inc. sold in April.
The fees may help sustain a jump in banks’ earnings from issuing corporate debt amid low interest rates. The five largest Wall Street firms generated $14.3 billion in debt underwriting revenue in the 12 months ended in June, up from $10 billion in 2011 and $11 billion in 2010, according to data from Bloomberg Industries.
Verizon’s fees are about five times what Apple paid for its April offering, which was approximately one-third the size of Verizon’s. Apple’s $53.25 million in fees amounted to 0.313 percent of the funds raised. Goldman Sachs Group Inc. (GS:US) and Deutsche Bank AG led that offering.
The four primary banks on today’s deal also generated revenue as advisers on the deal and lenders on Verizon’s $61 billion bridge loan, which funded the $58.9 billion in cash that Verizon agreed to pay Vodafone. Verizon said earlier this month that it planned to bring down the size of the bridge commitment with the bond issuance.
JPMorgan and Morgan Stanley (MS:US) were lead financial advisers to Verizon on its purchase of the stake, along with Guggenheim Securities LLC and Paul J. Taubman, Morgan Stanley’s former head of investment banking. Barclays and Bank of America also advised Verizon on the acquisition.
Other banks that each handled 4.8 percent of the bond offering were Citigroup Inc. (C:US), Credit Suisse Group AG (CSGN), Mizuho Financial Group Inc. (8411), Mitsubishi UFJ Financial Group Inc., Royal Bank of Canada, Royal Bank of Scotland Plc and Wells Fargo & Co. (WFC:US), the filing shows. Deutsche Bank and Banco Santander SA each underwrote 1.8 percent of the deal.
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