Verizon prices private exchange offers for 11 series of debt securities

By Susanna Moon

Chicago, Aug. 5 – Verizon Communications Inc. said it priced the 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 tender offers will continue until 11:59 p.m. ET on Aug. 19. The offers began July 23.

As previously announced, Verizon is offering to issue up to $2 billion of new notes due 2020 in exchange for the following notes:

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

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

The company is also offering to issue $4.5 billion of new notes due 2046 in exchange for the following notes:

• 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 issue up to $5.5 billion of new notes due 2054 in exchange for the following notes:

• 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.

Pricing details

The total purchase price per $1,000 principal amount was set at 11 a.m. ET on Aug. 5 using the sum of the yield on the bid-side price of a reference U.S. Treasury security plus a fixed spread as follows:

• $1,034.77 for Verizon’s $4.25 billion 2.5% notes due 2016 with a reference yield of 0.45% and exchange offer yield of 0.8%; and

• $1,073.19 for Verizon’s $4.75 billion 3.65% notes due 2018 with reference yield of 1.675% and exchange offer yield of 1.775%.

• $1,363.70 for Verizon’s $1 billion 7.35% notes due 2039 with a reference yield of 3.312% and exchange offer yield of 4.812%;

• $1,417.04 for Alltel’s $700 million 7.875% debentures due 2032 with a reference yield of 3.312% and exchange offer yield of 4.462%;

• $1,401.10 for Verizon’s $400 million 7.75% notes due 2032 with a reference yield of 3.312% and exchange offer yield of 4.462%;

• $1,384.64 for Verizon’s $2 billion 7.75% notes due 2030 with a reference yield of 3.312% and exchange offer yield of 4.412%;

• $1,256.13 for Alltel’s $300 million 6.8% debentures due 2029 with a reference yield of 3.312% and exchange offer yield of 4.412%; and

• $1,247.05 for Verizon’s $6 billion 6.4% notes due 2033 with a reference yield of 3.312% and exchange offer yield of 4.462%.

• $1,270.46 for Verizon’s $15 billion 6.55% notes due 2043 with a reference yield of 3.312% and exchange offer yield of 4.812%;

• $1,309.92 for Verizon’s $1.25 billion 6.9% notes due 2038 with a reference yield of 3.312% and exchange offer yield of 4.712%; and

• $1,238.22 for Verizon’s $1.75 billion 6.4% notes due 2038 with a reference yield of 3.312% and exchange offer yield of 4.712%.

For the notes to be exchanged for new 2020 notes, the reference security and spread was the 0.5% security due June 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 was the 3.625% Treasury due Feb. 15, 2044. The spread was 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 was the 3.625% Treasury due Feb. 15, 2044. The spread was 150 bps for the 6.55% notes and 140 bps for the 6.9% and 6.4% notes.

The total exchange price includes a $50.00 early participation payment per $1,000 principal amount of notes tendered by 5 p.m. ET on Aug. 5, the early tender date.

Those who tender after the early deadline will receive the total exchange value less the early premium.

The company will also pay accrued interest to but excluding the settlement date of Aug. 21.

Tendered notes may no longer be withdrawn, as of the early participation date.

Interest on new notes

The coupon for the new notes was set using the sum of the yield based on the bid-side price of a reference Treasury security plus a spread, as follows:

• 2.625% for the notes due 2020 using the 1.625% Treasury due June 30, 2019 plus 95 bps for a reference yield of 1.675%;

• 4.862% for the notes due 2046 using the 3.625% Treasury due Feb. 15, 2044 plus 155 bps for a reference yield of 3.312%; and

• 5.012% for the notes due 2054 using the 3.625% Treasury due Feb. 15, 2044 plus 170 bps for a reference yield of 3.312%.

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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