UPDATE 2-Verizon to roadshow potential record bond issue next week

Tue Sep 3, 2013 5:53pm EDT

By Danielle Robinson and Michelle Sierra

NEW YORK/LONDON, Sept 3 (IFR/LPC) - Verizon Communications could steal the record from Apple for the biggest bond issue ever to hit the global markets in coming weeks, as it begins the process of raising US$50bn of bonds to pay for part of the US$130bn price take on the 45% stake in Verizon Wireless that it is buying from Vodafone.

Sources in the corporate bond market said they were hearing a US dollar deal is on its way and could be as big as US$20bn, beating even the US$17bn multi-tranche offering by Apple in April.

Verizon will begin roadshowing a deal on September 9 and 10 in the US and then move to Europe for investor meetings from September 13-17.

Bookrunners for the roadshow are JP Morgan, Morgan Stanley, Bank of America Merrill Lynch and Barclays.

The first offering is expected to be just in dollars and because of its size will include every possible tenor across the yield curve, with floating rate tranches as well as fixed rate portions at the shorter end.

The proceeds of the first deal will go toward paying down a record US$61bn bridge loan, again by JP Morgan, Morgan Stanley, Bank of America Merrill Lynch and Barclays.

The US$61bn 364-day bridge loan will be refinanced with a permanent capital structure, consisting of US$49bn of corporate bonds and US$12bn of three and five-year term loans. Verizon is also raising an additional us$2bn revolver, but it is not expected to be drawn, according to Thomson Reuters LPC.

Some of the US$61bn bridge loan may be drawn and funded as Verizon may be unable to issue the full US$49bn of bonds by the first quarter of 2014, when the underlying acquisition is expected to close, due to the size of the deal.

In an 8K filing, Verizon stated the US$130bn would be paid for in the form of US$58.89bn in cash, US$60.15bn in stock, US$5bn of senior unsecured notes, the transfer of Verizon's indirectly owned 23.1% interest in Vodafone Omnitel worth US$3.5bn and US$2.5bn in assumed debt.

The 8K said Verizon has the right to increase the cash portion of the purchase price by US$15bn if it wants. Verizon CDS are 2.5bp wider at 85.5.

Verizon's cash bond spreads have barely reacted to the news, indicating a receptive investor audience for the deluge of bonds on the way.

Verizon 2.45% November 2022s were trading at 133bp bid today, just 3bp wider than late last week and 8bp wider than the 125bp bid level before details of acquisition were leaked.

A widening of 8bp is considered negligible given the level of bond issuance that Verizon is expected to do.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article