By Danielle Robinson
NEW YORK, Sept 12 (IFR) - Verizon's new US$49 billion bondssoared in secondary trading on Thursday, meaning tens ofmillions in potential profits for investors who got in on thelargest corporate bond issue ever.
The telecoms giant awed the bond market with the offering onWednesday, and by midday Thursday the new issue had rocketed upas much as seven-plus points in dollar price.
The eight different maturities of the massive deal were alltrading at least 45 basis points (bp) tighter than Wednesday'spricing, with some tightening as much as 80bp.
The US$15 billion 30-year tranche, where investors get thebiggest bang for their buck because of the long maturity, wastrading at US$107.467, giving it a spread of 219bp over Treasurybonds versus a 265bp spread at pricing.
That represents roughly a US$64 million potential profit forany investors that were allocated US$1 billion of the 30-yearVerizon bonds.
According to market sources, there were at least two US$1bnorders in the 30-year piece alone, while one asset managementfirm put in US$7 billion of orders across the differentmaturities.
"The amount of tightening has been extraordinary," said MattDuch, senior portfolio manager at Calvert Investment Management.
As bond yields tighten, bond prices rise - but few in themarket expected to see such a vast degree of tightening.
Tightening of just 20bp normally indicates that a bondissuer has priced a deal too cheaply, but even bankers away fromthe deal said that the sheer size of the issue required a largeconcession.
"This was obviously a transaction that was all about size,not price," said one banker not involved with the Verizon trade.
The $49 billion raised, along with about $12 billion of termloans, will completely refinance the $61 billion one-year bridgeloan put in place last week to cover the debt portion ofVerizon's acquisition of Vodafone's 45% holding inVerizon Wireless.
"The issuer had accepted that this was what it would take ifit wanted to get its potentially much more expensive bridge loantaken out in one hit," the banker said.
"In order to flush out so much money, it needed to be cheapto pretty much everything else in the investment-grade market."
Around midday, these were the levels being quoted for theeight tranches of the deal:
VZ 6.55% 2043s - T+219bp $107.467
VZ 6.40% 2033s - T+196bp $107.294
VZ 5.15% 2023s - T+179bp $103.823
VZ 4.50% 2020s - T+148bp $103.811
VZ 3.65% 2018s - T+115bp $103.801
VZ 2.50% 2016s - T+85bp $102.273
VZ FRN 2018s - $103.57
VZ FRN 2016s - $102.51