Verizon to issue $13.37 billion new notes in exchange for seven series

By Susanna Moon

Chicago, March 12 – Verizon Communications Inc. announced the results of its private offers to exchange a maximum amount of notes issued by Verizon and by subsidiary GTE Corp.

In the exchange offer, Verizon expects to issue $2,868,704,000 principal amount of new notes due 2036, $5 billion principal amount of new notes due 2048 and $5,499,999,000 principal amount of new notes due 2055, according to a company press release.

Verizon said on Feb. 26 that it lifted the tender caps for the first two offers and left the maximum exchange amount unchanged for the 6.55% notes due 2043. The company also gave the results of the offer as of 5 p.m. ET on Feb. 25, the early tender date.

The exchange offers ended at 11:59 p.m. ET on March 11, with settlement set for March 13. They began on Feb. 11.

As previously announced, pricing was set Feb. 25 with the new notes coupon calculated using the 3.125% Treasury plus a spread of 170 basis points for the notes due 2036, 195 bps for the notes due 2048 and 210 bps for the notes due 2055.

The total exchange prices include $50.00 per $1,000 principal amount of notes tendered by the early deadline.

Offer for 5.15% notes

In the offer for the company’s $11 million of outstanding 5.15% notes due 2023, investors tendered $2,483,481,000 of the notes, up from $2,454,501,000 as of the early tender deadline. All of the tendered notes were accepted for purchase.

Verizon planned to issue up to $3 billion of the new 4.272% notes due 2036 in the exchange offer.

As previously announced, Verizon will issue $1,155.88 of new notes due 2036 in exchange for each $1,000 of the 5.15% notes.

The exchange offer yield was 3.055% for the 5.15% notes.

Pricing for the 5.15% notes was set using the 2.25% Treasury due Nov. 15, 2024 plus 108 bps.

Offer for five series

For the five series of notes, the company accepted for purchase the following amount of tendered notes, listed in order of priority acceptance order:

• All of the $773,422,000 tendered ($1.25 billion outstanding) 6.9% notes due 2038, all $773,422,000 of which was tendered by the early deadline;

• All of the $883,625,000 tendered ($1.75 billion outstanding) 6.4% notes due 2038, of which $878,613,000 was tendered by the early deadline;

• $2,159,481,000 of the $2,330,674,000 tendered ($4,355,455,000 outstanding) 6.4% notes due 2033 using a proration factor of 92.68%, of which $2,327,313,000 was tendered by the early date;

• None of the $308,599,000 tendered ($750 million outstanding) 6.25% notes due 2037, all $308,599,000 of which was tendered by the early date; and

• None of the $145,136,000 of the $800 million outstanding of 6.94% debentures due 2028 issued by GTE, all $145,136,000 of which was tendered by the early date.

Verizon is the issuer of the first four series of notes listed above.

Because the tender amount for the first three series of notes exceeded the offer cap, Verizon said it will return the tendered 6.25% notes due 2037 and 6.94% debentures.

Verizon said it would issue up to $5 billion of new 4.522% notes due 2048, up from a total of $4.5 billion.

The total exchange price per $1,000 principal amount was set at

• $1,368.75 for the 6.9% notes due 2038;

• $1,295.14 for the 6.4% notes due 2038;

• $1,295.96 for the 6.4% notes due 2033;

• $1,285.74 for the 6.25% notes due 2037; and

• $1,310.24 for the 6.94% debentures, consisting of $100.00 of cash and $1,210.24 of new notes.

Pricing was set using the 3.125% Treasury due Aug. 15, 2044 with fixed spreads of 178 bps for the 6.9% notes and the 6.4% notes due 2038, 153 bps for the 6.4% notes due 2033, 167 bps for the 6.25% notes and 132 bps for the 6.94% debentures.

Offer for 6.55% notes

Finally, Verizon accepted for purchase $4,084,302,000 of the $4,652,391,000 tendered 6.55% notes due 2043, using a proration factor of 87.81%, the press release noted.

The company offered up to $5.5 billion of new 4.672% notes due 2055, up from $5 billion, in exchange for the $10,669,606,000 of outstanding 6.55% notes.

Holders had tendered $4,646,996,000 of the notes by the early tender date.

The total exchange price is $1,346.92 per $1,000 principal amount. The exchange offer yield is 4.402%.

Pricing for the 6.55% notes was set using the 3.125% Treasury due Aug. 15, 2044. The spread was 183 bps.

The company previously said that the purpose of the exchange offers is to, among other things, extend the maturity of the debt obligations associated with existing old notes during a time of favorable market conditions and to move the GTE debt obligations to Verizon.

Global Bondholder Services Corp. is the information agent (866 470-3800 or 212 430-3774 for banks and brokerage firms).

The telecommunications company is based in New York.

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