Verizon Makes Blockbuster Bond Sale To Buy Vodafone

Sep 11, 2013
Originally published on September 11, 2013 5:59 pm
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Wall Street is buzzing about Verizon today. The telecommunications giant carried out the biggest sale in the history of the bond market - $49 billion worth of corporate bonds.

Verizon will use the money to finance its recent mega deal with Vodafone. As NPR's Jim Zarroli reports, the sale comes at a time when interest rates are rising, and companies that want to raise money can't afford to lose any time.

JIM ZARROLI, BYLINE: Today's bond sale by Verizon was almost three times the size of the previous record sale, and it appeared to go off without a hitch. Investors lined up to buy the $49 billion in bonds, and Verizon seemed to have no trouble raising the money it needed.

DENNIS SAPUTO: From what I understand, the orders were in excess of $100 billion.

ZARROLI: Dennis Saputo, senior vice president at Moody's, says investors appear to have a fair amount of confidence in Verizon, which is widely seen as one of the better run telecommunications companies. The company is part owner with a British company, Vodafone, of the wireless venture bearing its name. But last week, Verizon said it would buy out Vodafone's share of the venture for $130 billion.

The deal will greatly increase the amount of cash Verizon gets every month, and Saputo says the sale today suggests that bond buyers were eager to invest in the company.

SAPUTO: There is an enormous amount of cash on the sidelines, sloshing around, that is looking for a home in this, you know, still relatively low interest rate environment. And the rates that Verizon offered on this bond were very attractive, and investors just gobbled it up.

ZARROLI: Saputo says Verizon is paying dearly for the Vodafone deal. The company will have to pay $5 billion a year in interest on the bonds it sold today, and on stock dividends. But the company couldn't really afford to wait. Interest rates have been steadily rising. Next week, the Federal Reserve is scheduled to meet, and it might ease up on some of the measures it's taken to stimulate economic growth. That would send rates even higher.

Jody Lurie is corporate credit analyst at Janney Montgomery Scott.

JODY LURIE: By, you know, next week this time, it's going to be a whole different ballpark theoretically in the bond market because we will at least have some clarity into what the Fed is doing.

ZARROLI: The rising interest rates made the cost of financing the Vodafone acquisition more expensive than it would have been a few months ago. But it's likely to pull in so much cash from the Vodafone deal that for now, at least, it will probably still come out ahead.

Jim Zarroli, NPR News, New York.



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