Verizon on course to sell $49bn of bonds

Verizon is on course to sell $49bn worth of bonds on Wednesday, the largest corporate debt sale in history, as the US telecoms group raises funds for its $130bn acquisition of the 45 per cent of Verizon Wireless it does not already own.

As 11 banks marketed the securities on Tuesday, order books swelled from $30bn to close to $100bn, people familiar with the transaction said. The sale is expected to be nearly three times as large as Apple's $17bn issue in April, the previous record.

The strong demand for the bonds comes after a torrid summer for corporate debt, with borrowing costs rising after the Federal Reserve indicated it could slow down its $85bn a month asset purchase programme.

A successful Verizon sale would help end the summer sell-off and pave the way for a rebound in corporate bonds.

Verizon will sell a combination of fixed and floating rate debt spread across six maturities from three to 30 years. Pricing is expected on Wednesday.

To entice investors Verizon is offering higher yields compared with its existing bonds.

Verizon's new 10-year bond offer may reach $15bn and pay about 225 basis points more than US Treasuries with similar maturities, these people said. This concession on price may total about 60 basis points for Verizon's new 10-year bonds. That compares with average new-issue concessions of about 15-20 basis points for 10-year maturities.

Investors interested in the bonds include pension funds, insurance companies and hedge funds, as well as Asian and Middle East investors.

"The price talk for the Verizon deal is now at attractive levels," said one hedge fund manager in New York. "It feels cheap, especially since the company should be able to deliver in the next few years. Funds like ours will participate."

The company started to pitch the bonds to investors on Monday in New York. The sale is being managed by Barclays, Bank of America Merrill Lynch, JPMorgan and Morgan Stanley.

News of the bond sale weighed on Verizon and other telecoms bonds in secondary markets.

Yields on Verizon's 2.45 per cent bond due in 2022, which move inversely to prices, stood at 4.54 per cent on Tuesday, up about 40 basis points since the end of August, according to Bloomberg data.

Spreads on investment grade telecoms bonds have widened by nearly 30 basis points over the past week, according to a Barclays index, as Verizon financing has taken shape.

Additional reporting by Henny Sender

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