Telefonica Brazil seeks to issue $650 mln in bonds

MADRID Wed May 1, 2013 2:53pm EDT

MADRID May 1 (Reuters) - Telefonica Brazil is looking to issue 1.3 billion reals ($650 million) of five-year debt in the local market, IFR Markets, a Thomson Reuters news and market analysis service, reported on Wednesday.

The telecoms company will place a ceiling rate of DI+65 basis points and Itau will be the sole bookrunner, IFR said.

"This is a very tight spread, even tighter than Cemig. Telefonica rarely comes to market and is rated AAA locally so they're able to do that," IFR quoted a local debt capital markets banker as saying.

A spokesman for Telefonica in Madrid declined to comment.

Equity bankers said parent company Telefonica was heard to be eyeing a sale of an up to 19 percent stake in its Colombian arm, with Bank of America Merrill Lynch as one of the possible lead bookrunners, according to IFR.

Telefonica, which has said it will reduce debt to under 47 billion euros ($62 billion) by year-end, compared to 51.3 billion euros at the end of 2012, announced on Tuesday it had sold 40 percent of its Central American assets for $500 million to help cut leverage.

The company, which is rated two notches above junk by two of the three main credit rating agencies, must shrink its debt to protect its prized investment grade status and prevent spiraling debt financing costs that would be the result of a downgrade.