Verizon Communications Inc. (NYSE:VZ) has launched a $49 billion bond sale this morning. The sale is likely to be the biggest of all time, with the previous holder of the title being Apple Inc. (NASDAQ:AAPL). The smartphone maker sold $17 billion in bonds last April. The market doesn’t seem to pushed on the Verizon deal today—the company’s stock is down a little in early trading.
The telecommunications company will sell as much as $49 billion in debt today, according to sources that spoke to The Wall Street Journal. The mobile carrier doesn’t exactly have the financial strength of Apple Inc. (NASDAQ:AAPL), but it is using the debt to purchase a cash generating asset.
Verizon Vodafone deal
Verizon Communications Inc. (NYSE:VZ) plans to use the money it raises today to finance part of the $130 acquisition of the half of Verizon Wireless controlled by Vodafone Group Plc (ADR) (NASDAQ:VOD) (LON:VOD). The deal has been expected for years, but finally came through earlier this month. The deal will finally see the company take charge of its most valuable asset.
The bonds that Verizon Communications Inc. (NYSE:VZ) plans to sell today will have an attractive interest rate according to the sources from the WSJ. Ten-year Verizon bonds are, according to people familiar with the matter, expected to yield 2.25 points higher than 10 year Treasuries.
Voracious debt demand
According to The Wall Street Journal there has been unexpectedly heavy demand for the Verizon issue. JPMorgan Chase & Co (NYSE:JPM), Morgan Stanley (NYSE:MS), Bank of America Corp (NYSE:BAC) and Barclays PLC (NYSE:BCS) (LON:BARC), who are underwriting the debt offering, thought it would take more than a year for Verizon Communications Inc. (NYSE:VZ) to raise the funds from the bond market.
The remarkable speed at which the bond market picked up on the deal is impressive, and it probably stems from the rising interest rates that have depressed other parts of the economy. Rising interest rates have made bonds much more attractive, and the deal that Verizon Communications Inc. (NYSE:VZ) is offering might seem a great alternative to a risky stay in stocks.