Verizon’s record-breaking bond issue

12 September 2013

Verizon beats Apple 49 to 17 – not in a game, but with the biggest deal the bond market has ever seen, and one that is even more significant given its timing, after a half year of myriad concerns for this market.

Rocco Bove, Kairos Partners Bond Manager commented, “History is being made today, and not only considering the colossal numbers on the table, but because all other issues pale in comparison to the Verizon deal”. Indeed, it dwarfs the Apple offering of $17 billion only a few months ago and even government issues do not compare: just think, in this respect, that in July, the Italian government placed 1.5 billion in thirty-year bonds and called it a success, but it was light-years away from what the US telecommunications giant is doing as we write in order to generate cash to finance its acquisition of a stake in Verizon Wireless from Vodafone.

Furthermore, for the time being, it appears that the company might opt for an issue in US dollars only, a “small detail” that implies the deal’s successful reception on the market. And not only that: “Looking at the distribution of tranches across the various maturities, it’s impressive to see 15 billion placed in the thirty-year tranche. This deal,” continued Bove, “is so big that it directly impacts the performance of  treasury bonds in the wake of interest rate hedging. So the good news is that wide margins of interest and profitability still exist on market that, despite the Fed’s tapering of measures, the rise in interest rates and the distress that this sector has faced, can still offer record-smashing figures.”