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By Davide Scigliuzzo
NEW YORK, Nov 23 (IFR) - Telco Vodafone pulled a 30-year USdollar bond offering from the market on Monday, just hours afterannouncing initial price thoughts for the trade, one of the leadmanagers told IFR.
Investors said the deal had been struggling to gain tractionmostly because of a lack of sufficient protection against apossible takeover or a downgrade.
The company, rated Baa1/BBB+/BBB+, was expected to raiseUS$1.5bn to US$2bn though the bond sale, which was beingmarketed at a spread of 250bp area over US Treasuries.
"I think it just needs better covenants," said one portfoliomanager, who argued poor liquidity and tight pricing alsocontributed to the lack of demand from the buyside.
A key concern for investors was the absence of a change ofcontrol option, which would have forced the company to redeemthe notes in the event of a takeover or a merger.
"The sticking point was change of control," said a secondportfolio manager. "It's also not the best kind of deal to bringin a holiday-shortened week."
Vodafone and double B rated Liberty Global abandoned talksto swap business assets in September, but bankers haven't ruledout the possibility of a merger between the two companies.
The company had offered to add step-ups to its couponstructure in the event of a downgrade below investment-gradefrom Moody's or Standard & Poor's, according to a thirdinvestor.
The coupon on the deal would have increased by 25bp pernotch of downgrade per agency, with a 200bp cap.
Vodafone is the second issuer to pull a multi-billionoffering from the US corporate bond market in less than a week.Veritas failed to sell high-yield bonds backing its leveragedbuyout from Carlyle last week amid pushback from investors.
Earlier this month, Chilean financial company TannerServicios Financieros, rated BBB-/BBB-, postponed a US$300m bondsale due to adverse market conditions.
In October, insurance company Allied World, ratedBaa1/BBB+/BBB+, also dropped the 30-year portion of its USdollar bond offering. (Reporting by Natalie Harrison; Writing by Davide Scigliuzzo;Editing by Jack Doran and Paul Kilby)
