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Deutsche Telekom eyes $15B of bonds for MetroPCS buy

Deutsche Telekom is seeking a $15 billion offering of senior unsecured notes in connection with the merger between T-Mobile USA and MetroPCS, regulatory filings show. If completed, this deal would be the second biggest offering of high-grade bonds on record, after Swiss pharmaceutical giant Roche completed a $16 billion, six-part bond offering in February 2009 to back its acquisition of San Francisco-based Genetech. And In May, United Technologies placed $9.8 billion across six tranches to back its $18.4 billion acquisition of aerospace and aircraft components maker Goodrich, representing the largest offering since Pfizer placed $13.5 billion in an M&A-driven deal in 2009, just weeks after the blockbuster Roche deal.

Deutsche Telekom is also seeking a $500 million unsecured revolver and a $5.5 billion backstop commitment for MetroPCS third-party financing transactions.

MetroPCS’s 7.875% senior notes due 2018 and 6.6256% notes due 2020 have traded up roughly another point today at 110.5/111 and 111/111.5, respectively. Yesterday, the 7.875% senior notes traded up two points to 110.5, while the 6.625% notes changed hands three points higher, at 109.75, as reports came in that the company was close to being taken over by Deutsche Telekom.

Deutsche Telekom and MetroPCS will roll existing debt into the new $15 billion offering of senior unsecured notes. According to the merger agreement, MetroPCS will have to secure the waivers from a majority of the holders of its 7.875% senior notes and 6.625% senior notes to any change of control resulting from the transaction. As of June 30, MetroPCS had $1 billion outstanding under the 7.875% and 6.625% senior notes.

MetroPCS will declare a 1 for 2 reverse stock split, make a cash payment of $1.5 billion to its shareholders, which is roughly $4.09 per share, and acquire all of T-Mobile’s capital stock by issuing to Deutsche Telekom 74% of its common stock on a pro forma basis. The combined company is expected to have roughly 42.5 million subscribers, $24.8 million of revenue, $6.3 billion of adjusted EBITDA, and $2.1 billion of free cash flow in 2012.

The MetroPCS acquisition is happening simultaneously as a $1.65 billion bond deal for Crown Castle International, which is planning to acquire up to 7,180 T-Mobile wireless-communications sites from T-Mobile for approximately $2.4 billion. There was an investor call this morning to launch the deal. Joint bookrunners on the 144A offering are Bank of America, Morgan Stanley, J.P. Morgan, RBC, SunTrust, Barclays, Citi, Credit Agricole, Deutsche Bank, Mitsubishi, RBS, and TD Securities, according to sources.

Deutsche Telekom, based in Bonn, Germany, is rated BBB+. – Staff reports