AT&T prices giant $22.5 billion deal; American Express, BNZ International sell notes

By Cristal Cody

Tupelo, Miss., July 27 – AT&T Inc. sold $22.5 billion of notes in seven tranches on Thursday in a deal that ranks as the largest corporate offering of the year and the third largest in history.

The deal had a final book size of nearly $60 billion.

The company plans to use the proceeds in part for its $85.4 billion cash and stock acquisition of Time Warner Inc. expected to close before the end of 2017.

American Express Credit Corp. also brought $2.25 billion of five-year fixed- and floating-rate senior notes to the primary market on Thursday.

BNZ International Funding Ltd. sold $650 million of long five-year notes.

Market focus on the day also was centered on the head of the U.K. Financial Conduct Authority’s announcement that the authority will phase out the benchmark Libor rate by the end of 2021.

The three-month Libor yield was up 1 basis point on Thursday to 1.32%.

“We expect that there will be a flurry of activity at law firms and the major banks in the next coming months as they sort out changes to their standard firms to deal with the upcoming Libor phase-out,” analysts at credit research firm Covenant Review said in a report on Thursday.

“We expect that these changes will be rolled out in the same way that other market-wide changes such as the introduction of Libor floors were made,” the analysts said.

“For now, the existing documentation can handle a Libor phase-out if it happened tomorrow – loans will instead by priced using the ‘base rate.’ But the ‘base rate’ will not be a long-term solution (from the perspective of borrowers) given that it has historically been higher than Libor.”

The Markit CDX North American Investment Grade index, flat for much of the week, softened about 1 bp on Thursday to a spread of 57 bps.

AT&T’s seven tranches

AT&T priced $22.5 billion of global senior notes (Baa1/BBB+/A-) in seven tranches on Thursday, according to a market source.

The company sold $750 million of floating-rate notes due Feb. 14, 2023 at Libor plus 89 basis points, on the tight side of talk in the Libor plus 94 bps area, plus or minus 5 bps.

AT&T priced $1.75 billion of 2.85% notes due Feb. 14, 2023 at a spread of Treasuries plus 100 bps. The notes were talked to come in the Treasuries plus 105 bps area, plus or minus 5 bps.

The $3 billion tranche of 3.4% notes due Aug. 14, 2024 were sold at a Treasuries plus 130 bps spread, compared to talk in the Treasuries plus 135 bps area, plus or minus 5 bps.

AT&T sold $5 billion of 3.9% notes due Aug. 14, 2027 at a spread of 160 bps over Treasuries. The notes were talked in the Treasuries plus 165 bps area, plus or minus 5 bps.

The $4.5 billion tranche of 4.9% notes due Aug. 14, 2037 priced at Treasuries plus 200 bps. Price guidance on the notes was in the Treasuries plus 205 bps area, plus or minus 5 bps.

AT&T sold $5 billion of 5.15% notes due Feb. 14, 2050 at a spread of 225 bps over Treasuries, on the tight side of talk in the Treasuries plus 230 bps area, plus or minus 5 bps.

The final tranche of $2.5 billion of 5.3% notes due Aug. 14, 2058 was sold with a Treasuries plus 240 bps spread. Price guidance on the bonds was in the Treasuries plus 245 bps area, plus or minus 5 bps.

The deal had a final book size of $58.5 billion.

BofA Merrill Lynch, Goldman Sachs & Co., J.P. Morgan Securities LLC, Mizuho Securities USA Inc. and MUFG were the bookrunners.

Proceeds will be used for general corporate purposes, including the company’s planned acquisition of Time Warner Inc.

The two previous bigger deals were Verizon Communications, Inc.’s $49 billion offering priced in September 2013 and Anheuser-Busch InBev SA/NV’s $46 billion priced in January 2016.

AT&T is a Dallas-based telecommunications company.

American Express sells $2.25 billion

American Express Credit sold $2.25 billion of fixed- and floating-rate senior notes (A3/BBB+/A) in two tranches on Thursday, according to FWP filings with the Securities and Exchange Commission.

America Express priced $400 million of five-year floating-rate notes at par to yield Libor plus 61 bps.

The company placed $1.85 billion of 2.5% five-year fixed-rate notes at 99.921 to yield 2.517% and a spread of Treasuries plus 68 bps.

Barclays, Citigroup Global Markets Inc., HSBC Securities (USA) Inc. and BofA Merrill Lynch were the bookrunners.

Proceeds will be used for general corporate purposes.

American Express Credit is a New York City-based credit card services provider.

BNZ prices notes

BNZ International Funding sold $650 million of 2.65% notes due Nov. 3, 2022 (Aa3/AA-) on Thursday at a spread of Treasuries plus 85 bps, according to a market source.

The notes were talked to price in the Treasuries plus 87.5 bps area, plus or minus 5 bps.

Citigroup Global Markets, nabSecurities, LLC, RBC Capital Markets LLC and Wells Fargo Securities, LLC were the bookrunners.

The company is a financing arm for Auckland, New Zealand-based Bank of New Zealand.

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