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Verizon prices record-breaking $49 billion bond deal

CNBC.com with wires
Wednesday, 11 Sep 2013 | 2:05 PM ET
Adam Jeffery | CNBC

Verizon Communications priced a massive $49 billion bond offering on Wednesday, the largest corporate debt offering ever.

The telecommunications giant, which will use the proceeds to finance a $130 billion acquisition of its wireless unit, sold a mix of three-year, five-year, seven-year, 10-year, 20-year and 30-year maturities.

Verizon's 30-year bond was priced to yield 6.559 percent and a 10-year bond was priced to yield 5.192 percent. The telecom giant sold $15 billion of 30-years and $11 billion of 10-years.

Pricing came in as expected and the bond spreads have narrowed, with the 10-year about 35 basis points tighter, Joel Levington of Brookfield Investment Management said.

"No surprise at the market's acceptance given how wide they bonds are being priced," he added. "Current bondholders' are the ones who are getting hurt from the new spreads and rating downgrades."

(Read more: Why $130 billion Verizon-Vodafone deal makes sense)

Verizon's mega offering
The company is looking to raise a record amount of debt to finance its Verizon Wireless acquisition. CNBC's Kayla Tausche reports.

The final size was at the top end of the $45-$49 billion range that market sources flagged late on Tuesday following overwhelming demand in excess of $100 billion. That eliminated the need for the company to tap the euro and sterling market, as originally planned, leaving some investors disappointed.

The overwhelming response to the offering follows Verizon's decision to offer bargain basement prices for the notes, to ensure it secured the financing it needs to help pay Vodafone for its 45 percent stake in Verizon Wireless.

The Verizon bond offering will partly refinance a $61 billion one-year bridge loan it has taken out to pay for the debt-funding portion of the acquisition. The rest of the bridge loan will be replaced with about $12 billion of three and five year term loans.

90 Seconds with Art Cashin: VZ bond deal 'stunning'
CNBC's Bob Pisani and Art Cashin, of UBS, discuss the day's trading, Apple's down day, the Syria effect, and the Verizon bond deal.

Ratings agency Fitch said in a press release that Verizon's bond offering "reduces the future risk of rising interest rates and removes the chance that Verizon would have had to pay a penalty if the deal failed due to financing." After downgrading the company one notch earlier this month, Fitch said that Verizon's leverage will be outside the range for a company with a credit rating of "A-," but its strong position in the wireless industry and significant free cash flow provide support for limiting the downgrade to just one notch.

The Verizon deal eclipsed a debt sale by Apple, the former record holder who sold $17 billion in bonds earlier this year.

Over 3,000 orders from more than 800 investors were recorded in dollar, one lead said, adding that the $49 billion trade is bigger than the combined size of the next three largest corporate bond deals in history: the $17 billion Apple trade, as well as offerings fromRoche and Abbvie.

—By CNBC.com. Reuters contributed to this article.

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