Home » Behavioural Investing » Verizon sticks it to Bond Investors. Here’s How Bond Investors Slit their Wrists! $VZ $BOND $TLT $VOD

Verizon sticks it to Bond Investors. Here’s How Bond Investors Slit their Wrists! $VZ $BOND $TLT $VOD

Verizon (NYSE:VZ) makes financial history by floating the largest commercial debt deal with $49 Billion raised. The transaction surpasses Apple (Nasdaq:AAPL) $17 Billion which drops to number two on the jumbo size list. Bond dealers are saying they could have sold about $90 Billion.

Proceeds help fund the Vodaphone (LSE:VOD) deal. There are several tranches and they break down as follows

  • $4.25b 3Y fixed launch at +165bps
  • $2.25 3Y FRN launch at 3mL +153bps
  • $4.75b 5Y fixed launched at +190bps
  • $1.75b 5Y FRN launch at 3mL +175bps
  • $4b 7Y notes launch at +215bps
  • $11b 10Y notes launch at +225bps
  • $6b 20Y bonds launch at +250bps
  • $15b 30Y bonds launch at +265bps

Most of the deal is long and fixed. Only $4 Billion is floating rate from the get go. $9 Billion is five years and under. Most market participants anticipate a rising rate environment into the foreseeable future. Verizon has therefore successfully hedged their cost of capital well into the future.

Bond investors have successfully slit their wrists by taking the long fixed term at this point. The deal was successfully placed in the US with some Asian participation. Too bad for European bond investors they’ll have to jump into the trading and buy out their better placed American competitors.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti

 

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