Verizon borrows $49,000,000,000 in just one day
TELECOMS giant Verizon borrowed a record $49bn (£31bn) from the bond markets yesterday – an astonishing sum that is larger than the economies of more than 90 countries.
The debt deal, which was so large that it took even Wall Street by surprise, will be used to finance the company’s $130bn purchase of Vodafone’s stake in mobile phone network Verizon Wireless.
Yesterday’s bond issue was easily the largest of its kind in history, with Verizon selling almost triple Apple’s $17bn bond offering in April, which at the time was itself a record.
Verizon bought Vodafone’s 45 per cent stake in joint US venture Verizon Wireless for $58.9bn cash, $60.2bn in Verizon stock and an additional $11bn comprised of smaller transactions.
Verizon is believed to have wanted to get the deal done quickly before tapering by the Federal Reserve changed the market environment.
The decision to offer bargain basement prices for the bonds sparked an overwhelming response from US investors.
Demand for the bonds before the sale on Tuesday soared in excess of $101bn, leading the US telecoms giant to postpone its plans to expand the offering to Europe today.
“This deal has done very well but it was no secret the deal was priced very cheaply in order to accommodate the massive amount of size the company wanted to print,” said Frank Reda, head of trading at Taplin, Canida and Habacht.
The Vodafone-Verizon deal is the third-largest takeover in history.
Verizon offered $11bn worth of 10 year bonds at 225 basis points above the price of US Treasuries.
The bond offering is being managed by Barclays, Bank of America, JP Morgan and Morgan Stanley, the same banks that agreed to supply a bridge loan.