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By Shankar Ramakrishnan
NEW YORK, Sept 11 (IFR) - Verizon Communications, asexpected, stole the limelight in the US high-grade market onWednesday by pricing a record US$49bn corporate bond.
Investors clamoured to get a slice of the deal as thetelecoms operator offered generous yields to lock in permanentfinancing for its US$130bn buyout of Verizon Wireless.
Anxious to complete the entire bond portion of itsacquisition financing before a crucial Federal Open MarketCommittee meeting next week, Verizon decided to scrapUS$5bn-US$10bn of issuance in euros and sterling, initiallyplanned for next week and do the entire amount in dollars.
At US$49bn, the eight-part deal is bigger than the threeprevious record-sized deals combined: Apple's US$17bndeal in April, AbbVie's US$14.7bn last November andRoche Holdings' US$13.5bn transaction in 2009. It isalso larger than the GDP of some 90 countries.
In addition, Verizon also now holds the record for thelargest three-year, five-year, seven-year, 10-year, 20-year and30-year fixed rate tranches, according to Thomson Reuters/SDCdata.
Sources with knowledge of the deal said Verizon and its keyunderwriters, Bank of America Merrill Lynch, Barclays, JP Morganand Morgan Stanley, were shocked at the size of the order bookthat emerged by Tuesday afternoon.
The total bond underwriting fees Verizon paid were alsosubstantial, estimated at between US$240m-US$249m by ThomsonReuters/Freeman Consulting.
Some of the fee bonanza was also shared with severalso-called passive bookrunners - Citi, Credit Suisse, Mizuho,Royal Bank of Canada, Royal Bank of Scotland and Wells Fargo.
The US$49bn, along with about US$12bn of term loans, willcompletely refinance the US$61bn one-year bridge loan put inplace last week to cover the debt portion of Verizon'sacquisition of Vodafone's 45% holding in VerizonWireless.
That the deal was priced cheaply was made obvious after thelonger-dated tranches snapped in as much as 45bp as soon as theywere free to trade. The three-year fixed rate tranche wastrading 65bp tighter than its launch spread.
Yet investors considered the deal to have been appropriatelypriced, given its size and the bigger risk Verizon faced if itdidn't get all of its bonds issued at once.
Sneaking through on such a big volume day was alsoColombia's sovereign-owned oil and gas company Ecopetrol which priced a US$2.5bn three-part that attracted anorder book of over US$12bn.
VERIZON COMMUNICATIONS
Verizon Communications (VZ), Baa1/BBB+/A- (all stable),announced a US dollar benchmark SEC-registered senior unsecuredmulti-tranche offering. The maturities included a 3-year fixedand floating (Sep 15, 2016), 5-year fixed and floating (Sep 14,2018), 7-year fixed (Sep 15, 2020), 10-year fixed (Sep 15,2023), 20-year fixed (Sep 15, 2033) and 30-year fixed (Sep 15,2043).
The active bookrunners are Barclays, BofA Merrill Lynch, JP Morgan, Morgan Stanley, with the passive bookrunners Citigroup,Credit Suisse, Mizuho, RBC, RBS and Wells Fargo. Settlement: T+5.
IPT:
3-year fixed T+165bp, 5-year fixed T+190bp, 7-year fixedT+215bp, 10-year fixed T+225bp, 20-year T+250bp, 30-year T+265bp
PRICE GUIDANCE:
3-year fixed T+165bp area, 3-year FRN 3mL+equivalent, 5-yearfixed T+190bp area, 5-year FRN 3mL+equivalent, 7-year fixedT+215bp area, 10-year fixed T+225bp area, 20-year T+250bp area,30-year T+265bp area. Area is +/- 5bp
LAUNCH: US$49bn 8-tranche senior notes
- US$4.25bn 3yr fixed at T+165bp
- US$2.25bn 3yr FRN 3mL+153bp
- US$4.75bn 5yr fixed T+190bp
- US$1.75bn 5yr FRN 3mL+175bp
- US$4bn 7yr fixed T+215bp
- US$11bn 10yr fixed T+225bp
- US$6.0bn 20yr T+250bp
- US$15bn 30yr T+265bp
PRICED: US$49bn 8-tranche senior notes
- US$4.25bn. Cpn 2.50%. Due 9/15/16. Ip 99.923. Yld 2.527%.T+165bp. MWC T+30bp
- US$2.25bn. Cpn 3mL+153bp. Due 9/15/16. Ip par. Yld3mL+153bp
- US$4.75bn. Cpn 3.65%. Due 9/14/18. Ip 99.996. Yld 3.651%.T+190bp. MWC T+35bp
- US$1.75bn. Cpn 3mL+175bp. Due 9/14/18. Ip par. Yld3mL+175bp
- US$4bn. Cpn 4.50%. Due 9/15/20. Ip 99.870. Yld 4.522%.T+215bp. MWC T+35bp
- US$11bn. Cpn 5.15%. Due 9/15/23. Ip 99.676. Yld 5.192%.T+225bp. MWC T+40bp
- US$6bn. Cpn 6.40% Due 9/15/33. Ip 99.900 Yld 6.409%.T+250bp. MWC T+40bp
- US$15bn. Cpn 6.55%. Due 9/15/43. Ip 99.883. Yld6.559%.T+265bp. MWC T+45bp.
BOOK SIZE: US$101bn.
3-year fixed: US$9.25bn; 3-year floater: US$6bn, 5-yearfloater: US$5bn, 5-year fixed: US$12bn; 7-year fixed: US$9bn;10-year: US$21.5bn; 20-year: US$11.25bn; 30-year: US$27bn
COMPS:
VZ 2.0% November 2016 at T+105bp, G+96bp US$100.3
VZ 1.1% November 2017 at T+90bp, G+125bp
VZ 2.45% November 2022 at T+157bp, G+172bp
VZ 3.85% November 2042 at T+175bp, G+181bp
T 0.9% February 2016 A3/A- at T+47bp, G+68bp
T 1.4% December 2017 A3/A- at T+74bp, G+106bp
T 2.625% December 2022 A3/A- at T+150bp, G+163bp
T 4.3% December 2042 A3/A- at T+183bp, G+189bp
ECOPETROL
Ecopetrol SA, Baa2/BBB/BBB-, announced a US DOLLAR benchmarkSEC-registered two-part deal that consisted of 5-year and10-year senior notes. The notes contain a make-whole call and a101 change of control put and withholding tax redemption call atpar. The active bookrunners are Bank of America Merrill Lynchand Morgan Stanley.
UOP: general corporate purposes, including capexexpeditures.
Settlement: T+5.
Biz: Ecopetrol is Colombia's Sovereign-owned oil & gascompany.
IPT: 5-year T+300bp area; 10-year T+325bp area; 30-yearT+375bp area
PRICE GUIDANCE: 5-year T+270bp area; 10-year T+315bp area;30-year T+360bp area
LAUNCH: US$2.5bn total
- US$350m 5-year at T+260bp
- US$1.3bn 10-year at T+305bp
- US$850m 30-year at T+360bp
PRICED:
- US$350m 5-year at T+260bp (4.25% coupon, 99.559, 4.349%yield)
- US$1.3bn 10-year at T+305bp (5.875% coupon, 99.033, 6.005%yield)
- US$850m 30-year at T+350bp (7.375% coupon, 99.474, 7.419%yield)
BOOK SIZE: Over US$12bn (Reporting by Shankar Ramakrishnan; Editing by Varghese Joseph)
