Custom-made
Verizon’s US$25bn nine-tranche corporate bond was the largest investment-grade deal of the year and Verizon’s biggest since 2013. It generated one of the biggest order books of all time and included the largest ever corporate bond tied to SOFR.
The US telecoms company hit the market in March after spending US$45bn on C-band spectrum in the Federal Communications Commission's auction, almost twice as much as the next largest bidder, AT&T, to expand its 5G capabilities.
“There have been a lot of large event-type transactions this year but this one was really unique, as it wasn’t a classic M&A situation,” said Anish Shah, Morgan Stanley’s global head of investment-grade acquisition finance and chair of the capital commitment committee. “We designed something that was highly customised around meeting the timing objectives that the FCC set out.”
Verizon lined up a US$25bn loan facility for the investment but the take-out of that bridge in the bond markets after the company’s massive spending was made public required careful marketing. The spending at the C-band auction set back Verizon's pathway to becoming a solidly Single A credit (up from its Baa1/BBB+/A–). Both Moody's and S&P reaffirmed their ratings, but moved their outlooks to stable from positive.
“Positioning the credit was extremely important particularly in the context of a company that the market knew so well,” said Wylie Collins, managing director for fixed-income capital markets at Morgan Stanley.
Despite a deluge of supply in March, joint global coordinators JP Morgan and Morgan Stanley, which were also active bookrunners alongside Barclays, Citigroup and Credit Suisse, kicked off marketing in Asia on March 10 before moving through European and US accounts on March 11.
Order books soared to a peak of US$116bn midway through price progression and closed at US$104.3bn, helping banks tighten spreads by 30bp–40bp from initial price thoughts on three, five, seven, 10, 20, 30 and 40-year fixed-rate tranches as well as two floating-rate notes in three and five-year tenors.
Bulge bracket banks on the bridge facility accepted a reduced share of the fees from the bond take-out to allow Verizon the flexibility to make allocations to its chosen diversity and inclusion firms.
Among a 29-strong roster of banks involved in the sales effort, Verizon hired Loop Capital as a joint bookrunner, and Ramirez, Siebert Williams Shank, Academy Securities, CastleOak Securities, AmeriVet Securities, Bancroft Capital, Cabrera Capital Markets and R Seelaus as co-managers. In all, the deal generated US$14m in fees for these D&I firms, a record for fees paid to minority and women-owned firms in a single transaction, according to Verizon.
To see the digital version of this report, please click here
To purchase printed copies or a PDF of this report, please email leonie.welss@lseg.com
