Verizon plans $6.15b bond to refinance debt

It will use the notes to refinance $2.25b of floating-rate debt that matures in September

Verizon Communications Inc. is selling $6.15 billion of bonds to take advantage of some of the lowest borrowing costs in more than a year.

The largest US wireless carrier reduced yields on its proposed debt offering, according to a person with knowledge of the deal, who asked not to be identified because the terms are private. A $1.5 billion 30-year portion may now yield about 1.9 percentage points above Treasuries, down from an initial offer of 2.15 percentage points and about 0.1 percentage point less than where Verizon’s 30year bonds issued in 2013 trade.

“There’s just demand coming from everywhere,” said Tim Doubek, a money manager at Columbia Threadneedle. “It’s really wide open for companies Demand for bonds of blue-chip American companies, such as Verizon, is getting a boost as investors flee negative rates in Europe and Japan. The extra yield above Treasuries investors demand to hold US dollar investment-grade bonds dropped to 1.47 percentage points on Tuesday, the lowest level since June 2015, according to data compiled by Bloomberg to do what they want to do. I don’t think they even need to think about what this is going to cost.”

Demand for bonds of bluechip American companies, such as Verizon, is getting a boost as investors flee negative rates

in Europe and Japan. The extra yield above Treasuries investors demand to hold US dollar investment-grade bonds dropped to 1.47 percentage points on Tuesday, the lowest level since June 2015, according to data compiled by Bloomberg. Verizon will use the notes to refinance $2.25 billion of floating-rate debt that matures in September, according to a company filing on Wednesday. Proceeds will also be used for general corporate purposes, including financing acquisitions. The company announced plans on Monday to acquire Yahoo Inc.’s internet business for $4.83 billion.

Bank of America Corp., Deutsche Bank AG, Goldman Sachs Group Inc. and Mizuho Financial Group Inc. are managing the bond sale, according to the filing.

In a note reviewing the deal, Creditsights analysts led by Chris Ucko maintained their equivalent of a hold rating on Verizon’s debt, saying the Yahoo acquisition would be “more or less a drop in the bucket for” the New York-based phone carrier and any new borrowings to fund the takeover wouldn’t alter the company’s capital structure. Verizon had a debt load of $99.7 billion as of the quarter ended June 30.