Verizon Communications Inc. has launched a $25 billion public offering of senior notes across nine tranches, as the company locks in liquidity following its $52.9 billion play for spectrum assets amid an industry frenzy to roll out 5G networks. Global coordinators for the bond offering are J.P. Morgan and Morgan Stanley, along with joint bookrunners Barclays, Citi and Credit Suisse.
The launch amount is tied for the sixth largest corporate bond placement on record, matching the $25 billion priced by Boeing Co. last April to bolster its liquidity in the early weeks of the pandemic crisis. The deals are the biggest since AbbVie Inc. priced $30 billion of notes in November 2019 for its Allergan acquisition.
Verizon continues to hold the top spot in terms of largest corporate offerings, via its $49 billion placement in September 2013 for its acquisition of Verizon Wireless. The other offerings larger than today's placement include a $46 billion bond deal for Anheuser-Busch Inbev SA in January 2016 (for its acquisition of SABMiller), $40 billion for CVS Health Corp. in March 2018 (for its acquisition of Aetna), and a $27 billion print for Comcast Corp. in October 2018 (for its acquisition of Sky).
Proceeds of today's jumbo placement are earmarked for general corporate purposes, which may include the completion of previously announced acquisitions, the acquisition of spectrum licenses and, depending on market and other conditions, the repayment of outstanding indebtedness, according to regulatory filings.
Verizon spent roughly $45 billion in the auction, and about another $8 billion in satellite incentive payments and relocation costs. For the auction portion, Verizon said in its March 10 Investor Day presentation that it expected to fund the initial $8.2 billion in spectrum payments from cash on hand, which amounted to $22.2 billion on Dec. 20, 2020. The remaining $36.4 billion of payments would be financed via its bank facility, the public debt markets, and cash on hand and commercial paper.
Ratings agencies yesterday affirmed Verizon's BBB+/Baa1/A- ratings profile, though S&P Global Ratings and Moody's revised down their outlooks to stable, from positive. The outlook is now stable across all three agencies. S&P Global Ratings said it expects that Verizon's adjusted debt to EBITDA will increase to roughly 3.2x in 2021, from about 2.6x at year-end 2020, "and will remain substantially above our 2.5x threshold for an upgrade over the next couple of years."
The launch was posted firm to guidance ranges, across $1.75 billion of 3-year notes at T+45 (IPT T+80-85); $750 million of 3-year floating-rate notes at 50 bps over the Secured overnight financing rate (Sofr); $2.75 billion of 5-year notes at T+70 (IPT T+100-105); $750 million of 5-year FRNs at 79 bps over Sofr; $3 billion of 7-year notes at T+90 (IPT T+120-125); $4.25 billion of 10-year notes at T+107 (IPT T+135 area); $3.75 billion of 20-year bonds at T+120 (IPT T+150 area); $4.5 billion of 30-year bonds at T+130 (IPT T+160 area); and $3.5 billion of 40-year bonds at T+145 (IPT T+175 area).
Pricing for the November 2020 placement included 0.85% 5-year notes at T+40, 1.75% 10-year notes at T+85, 2.65% 20-year bonds at T+115, 2.875% 30-year bonds at T+115, and 3.00% 40-year bonds at T+130. The company is eyeing higher long-term absolute costs today, as the 1.75% 10-year issue traded this morning at T+98, or 2.47%; and the 2.875% 30-year changed hands this morning at T+121, or 3.48%, according to MarketAxess.
