Verizon Communications Inc. (NYSE:VZ) Issues Bonds To Refinance Part Of Its Debts

Verizon Communications Inc. (NYSE:VZ) seems to have taken advantage of the prevailing interest rate to reduce its interest burden to some extent. The company has resorted to selling bonds with a clear intention of refinancing part of its current debt instruments.

Debt Maturity

The Verizon Communications Inc. (NYSE:VZ) would be witnessing maturities for some of its debt in the next four years, Bloomberg reported. While Verizon has an estimated debt of $23 billion for maturity, its $6.5 billion worth of bond sale would help the company redeem notes that will mature from next year to 2018.

It issued two types of bonds of $2.5 billion each with tenure of ten years and twenty years while another $1.5 billion worth of bonds would mature after seven years. While the company’s spokesperson declined to talk on the sale of the bond, Bloomberg report said that the company’s fresh ten-year bond was expected to provide yield of 1.25%. It was higher than the similar kind of Treasuries.

Verizon Communications Inc. (NYSE:VZ)’s latest sale of bonds yield would be lower by 90 basis points than the $11 billion bond issued in September 2013 with a ten-year period. The yield for a bond issued last year was 2.25%.

Lower Yield

It appeared that the general trend indicated a lower yield as investment-grade debenture yield slipped 62 basis points to 2.97% after Verizon Communications Inc. (NYSE:VZ) sold $49 billion worth of corporate bonds last year. Average yields also slipped to 2.89% as of October 15, which was the lowest after May 2013.

Obviously, the move invited a favorable comment from a senior bond analyst from Gimme Credit LLC. Dave Novosel said that the company would save on interest costs given the current low rates.

Verizon Bonds’ were the most actively traded corporate securities by dealers. It represented 5.9% of the dealer trade volumes of $1 million or more recently, report said quoting Financial Industry Regulatory Authority’s data.

Tightening of Spreads

Analyst Novosel also said that the time was ripe for the corporate to issue debt instruments since the interest rates and spreads were pretty tight. Corporate bonds’ average spreads with a rating of BBB witnessed 40 basis points fall after September 2013. Standard & Poor’s has assigned BBB+ rating to Verizon bond.

About the Author

Cooper is a graduated from Buffalo State College in New York with a bachelor's degree in Broadcast Journalism.

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