Verizon starts private exchange offers for 11 series of debt securities

By Toni Weeks

San Luis Obispo, Calif., July 23 – Verizon Communications Inc. announced it has begun 11 separate private offers to exchange debt securities issued by Verizon and indirect wholly owned subsidiary Alltel Corp. for new debt securities issued by Verizon.

The offers are being extended in a private transaction only to qualified institutional buyers as defined in Rule 144A under the U.S. Securities Act of 1933, as amended, and to holders other than U.S. persons, as defined in Rule 902 under Regulation S of the U.S. Securities Act.

Verizon is offering to exchange the following for new notes due 2020, provided that not more than $2 billion in total of new notes will be issued:

• Verizon’s $4.25 billion 2.5% notes due 2016; and

• Verizon’s $4.75 billion 3.65% notes due 2018.

The company is offering to exchange the following for new notes due 2046, with the aggregate amount of new notes to be issued capped at $4.5 billion:

• Verizon’s $1 billion 7.35% notes due 2039;

• Alltel’s $700 million 7.875% debentures due 2032;

• Verizon’s $400 million 7.75% notes due 2032;

• Verizon’s $2 billion 7.75% notes due 2030;

• Alltel’s $300 million 6.8% debentures due 2029; and

• Verizon’s $6 billion 6.4% notes due 2033.

Verizon is also offering to exchange the following series for new notes due 2054, provided that not more than a total of $5.5 billion of new notes will be issued:

• Verizon’s $15 billion 6.55% notes due 2043;

• Verizon’s $1.25 billion 6.9% notes due 2038; and

• Verizon’s $1.75 billion 6.4% notes due 2038.

The notes are listed in order of priority within each group. All notes with a higher acceptance priority will be accepted for exchange before any notes with a lower priority. If the remaining available portion of the applicable maximum exchange amount is not adequate to permit acceptance of all tendered notes having a particular priority level, Verizon will allocate the maximum exchange amount among the aggregate principal amount on a pro rata basis, and any tendered notes with a lower priority level will not be accepted for exchange.

Tender offer prices

The total exchange price per $1,000 principal amount of old notes will be calculated at 11 a.m. ET on Aug. 5 and will be equal to the sum of (i) the yield based on the bid-side price of the applicable reference U.S. Treasury security plus (ii) the fixed spread.

The reference securities and spreads are as follows:

For the notes to be exchanged for new 2020 notes, the applicable reference security and spread is the 0.5% security due July 30, 2016 plus 35 bps for the 2.5% notes and the 1.625% Treasury due June 30, 2019 plus 10 bps for the 3.65% notes.

For the six series of notes to be exchanged for new 2046 notes, the reference security is the 3.625% Treasury due Feb. 15, 2044. The spread is 150 bps for the 7.35% notes; 115 bps for the 7.875% debentures, 7.75% notes due 2032 and 6.4% notes; and 110 bps for the 7.75% notes due 2030 and the 6.88% debentures.

For the notes to be exchanged for new 2054 notes, the reference security is the 3.625% Treasury due Feb. 15, 2044. The spread is 150 bps for the 6.55% notes and 140 bps for the 6.9% and 6.4% notes.

Holders who validly tender their notes by 5 p.m. ET on Aug. 5 will receive the applicable total exchange price, which includes a $50.00 early participation payment per $1,000 principal amount of notes.

The company will also pay accrued interest to, but not including, the settlement date, which is expected to be Aug. 21.

Tendered notes may be withdrawn by the early participation date.

The tender offers will expire at 11:59 p.m. ET on Aug. 19.

Interest on new notes

Each series of new notes will bear interest at a rate per year equal to the sum of the yield based on the bid-side price of the applicable reference Treasury security plus a spread, as follows:

• The 1.625% Treasury due June 30, 2019 plus 95 bps for the notes due 2020;

• The 3.625% Treasury due Feb. 15, 2044 plus 155 bps for the notes due 2046; and

• The 3.625% Treasury due Feb. 15, 2044 plus 170 bps for the notes due 2054.

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

Verizon is a New York City-based telecommunications company.

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