US telecoms giant Verizon Communications is to raise up to US$49bn through a bond offering to carru through the planned buyout of Vodafone, its current partner in the Verizon Wireless joint venture.
The sale by the New York-based company would easily surpass the previous biggest corporate-bond sale, the US$17bn offering in April by Apple Inc.
Reports suggest that the sale will encourage other prospective corporate bond issuers, which are finding a ready market for financing as they consider expanding via investment or purchases against the backdrop of a strengthening US economy and a continuing low interest rate environment. It also promises substantial fees for the Wall Street banks that put together merger and acquisition (M&A) deals.
The reports also indicate that demand for the debt has surprised even the banks selling the bonds, with Verizon receiving more than US$90bn worth of investor orders. The company initially expected to sell about US$20bn of debt this week but repeatedly increased that target as orders continued to arrive.
The steady growth in the size of the offering is seen as evidence of the eagerness among many large companies to sell debt ahead of a meeting next week by the US Federal Reserve. Some investors expect the central bank to reduce its monetary stimulus in a shift that would likely lead to higher interest rates.
The pricing is expected to be attractive to investors, with 10-year Verizon bonds likely to yield about 2.25 percentage points more than comparable Treasurys, compared with 1.66 percentage points on an existing nine-year bond, according to MarketAxess.
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