Verizon hits European bond market with triple trancher

(Adds details, background)

By Josie Cox

LONDON, Feb 5 (IFR) - Investors across the continent braced for a bumper bond from telco heavyweight Verizon Communications (LSE: VZC.L - news) on Wednesday, hoping to pocket some beefy premiums - even if not quite as large as the concessions offered on its record-breaking USD49bn bond from last September.

Wednesday's offering, a further part of financing for the company's USD130bn acquisition of Verizon Wireless from Vodafone agreed last year, will consist of a dual-tranche eight- and 12-year euro bond and a single 20-year sterling piece, all three slated to be benchmark in size.

Sources said the offering would likely have a total volume of EUR3-5bn-equivalent.

Joint bookrunners Credit Suisse (NYSE: CS - news) , Deutsche Bank (Xetra: DBK.DE - news) , RBS (LSE: RBS.L - news) and Santander set price thoughts on the euro portions at mid-swaps plus 105bp area and plus 135bp area respectively, and on a 20-year sterling bond at 165bp area over the 4.25% 2032 Gilt.

"The initial price thoughts look generous but are not as generous as they were on last year's dollar portion, implying that the company is focusing more on spread than on size," said one banking source uninvolved in the deal.

Verizon (NYSE: VZ - news) is rated Baa1/BBB+/A- (Moody's/S&P/Fitch) and its closest peer is compatriot AT&T (NYSE: T - news) , which is A3/A- (Moody's/S&P).

Bankers said that price thoughts on all three notes looked to be around 20-25bp back of where AT&T would be able to sell deals of the same maturities.

One pointed out, however, that AT&T is a very regular issuer in bond markets, meaning that it trades wide considering its credit profile.

The implied curve of 30bp between the eight- and 12-year bonds also looks relatively steep compared to the curves of other telcos like AT&T and Vodafone, also rated A3/A-.

Despite this, the premiums on all three tranches will be considerably smaller than the 75-100bp offered on some pieces of its USD49bn offering in September last year.

Thanks to offering investors so much value, books on that transaction peaked at USD101bn.

The issue was bigger than the three previous record-sized deals in corporate bond market history combined.

At the time of that transaction, Verizon had also planned to roadshow in euros and sterling, but later called off those meetings citing ample demand in the dollar market alone.

In November, Verizon was heard to have met investors across Europe and has since then been broadly tipped to be eyeing the market. (Reporting By Josie Cox; Editing by Alex Chambers and Julian Baker)