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JPMorgan, Morgan Stanley lead largest-ever loan for Verizon deal

Sunday, 1 Sep 2013 | 5:19 PM ET
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Long-time client relationships between JPMorgan Chase and Morgan Stanley with Verizon Communications are expected to pay off this week, when the company announces a $130 billion deal to buy out Vodafone's 45 percent stake in its wireless joint venture.

As part of the deal, the two banks—which took lead advisory roles for the buyer—are underwriting a more than $60 billion bridge loan, the largest-ever for a corporate issuer, according to people familiar with the matter. Bank of America and Barclays also have underwriting roles, and bonds are expected to be issued to cover the bridge loan "very quickly," these people said.

(Exact terms of the bridge loan could not be learned, but are expected to be favorable for competitive, investment-grade loan.)

(Read more: Vodafone investors split on best use of windfall)

The deal is set to be announced as soon as Monday midday. According to Reuters, the Verizon board will meet first thing Monday morning to vote on the deal. Vodafone issued a statement Sunday saying, "There is no certainty that an agreement will be reached," and that "a further announcement will be made as soon as practicable."

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If consummated, the deal would create many superlatives for Verizon. The bridge loan, at over $60 billion, would be the largest ever for a corporation; the resulting bonds would make Verizon the singe-largest issuer of outstanding corporate debt (surpassing AT&T's).

Bond yields have risen in the last three months as the market prepares for the Federal Reserve to begin tapering its long-running stimulus program, leading fewer companies to issue bonds. Market sources said that has caused a buildup in demand for investment-grade corporate debt like Verizon's—though the company is said to expect its credit to fall by one notch, it will remain highly rated.

Dozens of banks will syndicate, or slice up the risk of the loan, after the potential deal gets announced, but the lead underwriters—JPMorgan and Morgan Stanley—will be set to earn the most in fees.

The deal will also be marquee for a former Morgan Stanley banker said to be advising in a solo capacity: Paul Taubman, the firm's former co-head of its securities business. Taubman retired from Morgan Stanley in November 2012 when CEO James Gorman said he only wanted one executive running the business, and the Verizon deal will be the first announced in which Taubman advised independently.

By CNBC's Kayla Tausche

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