Verizon leverage ratio remains flat at 2.8x after notes sales, tender

By Devika Patel

Knoxville, Tenn., April 25 – Verizon Communications Inc. maintained a 2.8x net unsecured debt to adjusted EBITDA ratio last quarter even after net unsecured debt increased to $135.6 billion after the company sold $1.66 billion of notes in the quarter, offset by a $5.5 billion tender offer for several notes.

“We exited the quarter with $135.6 billion of net unsecured debt, an increase of $1.9 billion sequentially as we issued our fourth green bond, with the net proceeds expected to be allocated to renewable energy,” executive vice president and chief financial officer Matthew D. Ellis said on the company’s first quarter ended March 31 earnings conference call on April 22.

“In addition, we completed a number of other transactions during the quarter the proceeds of which were used as consideration in an over $5 billion tender offer to retire some higher cost, long-term debt.

“We ended the quarter with a net unsecured debt to adjusted EBITDA ratio of approximately 2.8x, flat on a sequential basis as expected,” Ellis said.

Cash and cash equivalents were $1,661,000,000 as of March 31, 2022, compared to $2,921,000,000 as of Dec. 31, 2021.

Long-term debt was $139,961,000,000 as of March 31, 2022, compared to $143,425,000,000 as of Dec. 31, 2021.

Debt maturing within one year was $13,421,000,000 as of March 31, 2022, compared to $7,443,000,000 as of Dec. 31, 2021.

On Feb. 16, the company priced $1 billion 3.875% green notes due March 1, 2052 at 98.949. The notes settled on March 1.

The notes were sold with a spread of 155 basis points over Treasuries, tighter than talk in the 165 bps to 170 bps area over Treasuries.

The notes have a make-whole call, at the greater of par and the discounted present value at Treasuries plus 25 basis points, until six months prior to maturity and a par call thereafter.

Loop Capital Markets LLC, BofA Securities, Inc., Samuel A. Ramirez & Co. Inc. and Siebert Williams Shank & Co. LLC were the bookrunners.

Proceeds were earmarked for financing or refinancing eligible green investments.

On Feb. 22, Verizon priced $655 million 4.1% notes due March 4, 2055 at par. The sale settled on March 4.

The notes are non-callable until March 4, 2027 when they will become callable at par.

Deutsche Bank AG, Taipei branch, J.P. Morgan Securities (Taiwan) Ltd. and Morgan Stanley Taiwan Ltd. were the bookrunners.

The company earmarked the proceeds for general corporate purposes, including debt repayment.

On March 7, Verizon announced the accepted amounts and pricing for its upsized $5.6 billion waterfall tender offer for 30 series of debt securities.

In an earlier March 7 announcement, Verizon said it raised the offer cap to about $5.6 billion from $4 billion. The new offer cap was the total amount of cash needed to purchase all roughly $5.5 billion notes tendered by the early deadline at 5 p.m. ET on March 4.

Verizon had launched the 30 separate tender offers on Feb. 16 and then amended them on Feb. 25. Verizon tweaked the offers to make them more generous by raising the spreads for the pricing considerations by 10 basis points on all 30 of the securities included in the tender offer and also extended the early participation deadline by two days.

The overall cap on the tender consideration excluded accrued coupon payments.

The securities were issued either by Verizon or subsidiaries of Verizon.

The first series was the only one with a subcap. With respect to Verizon’s offer to buy up to $1 billion from its $4,499,992,000 outstanding 2.987% notes due 2056 (Cusips: 92343VFW9, 92343VFM1, U9221ABR8), the total consideration was set at $844.10 per $1,000 principal amount of notes. Pricing was calculated using the 1.875% U.S. Treasury due Nov. 15, 2051 plus an increased 158 basis points (with pricing based on the first par call date). As of the early participation date, holders had tendered $848,838,000, or 18.86%, of the 2056 notes.

The rest of the waterfall offer notes and their accepted amounts, listed by their acceptance priority order, with updated pricing information that was 10 bps higher than the original offer in all cases and with the total consideration per $1,000 principal amount, were as follows:

• $273,211,000, or 19.39%, tendered of the $1,409,338,000 outstanding 4.812% notes due 2039 (Cusip: 92343VDR2) for a total consideration of $1,155.01, calculated using an offer yield of 3.587%. Pricing was based on the 2% U.S. Treasury due Nov. 15, 2041 plus 128 bps;

• $733,814,000, or 23.72%, tendered of the $3,093,771,000 outstanding 4.862% notes due 2046 (Cusip: 92343VCK8) for a total consideration of $1,185.89, based on an offer yield of 3.7%. Pricing was calculated using the 1.875% U.S. Treasury due Nov. 15, 2051 plus 148 bps;

• $26,314,000, or 3.64%, tendered of the $722,998,000 outstanding 5.012% notes due 2049 (Cusip: 92343VDS0) for a total consideration of $1,221.31, based on an offer yield of 3.71%. Pricing was calculated using the 1.875% U.S. Treasury due Nov. 15, 2051 plus 149 bps;

• $167,822,000, or 11.86%, tendered of the $1,414,483,000 outstanding 4.522% notes due 2048 (Cusip: 92343VCX0) for a total consideration of $1,138.12, based on an offer yield of 3.7%. Pricing was calculated using the 1.875% U.S. Treasury due Nov. 15, 2051 plus 148 bps;

• $637,792,000, or 25.92%, tendered of the $2,460,199,000 outstanding 4.272% notes due 2036 (Cusip: 92343VCV4) for a total consideration of $1,110.03, based on an offer yield of 3.277%. Pricing was calculated using the 1.875% U.S. Treasury due Feb. 15, 2032 plus 148 bps;

• $4,689,000, or 4.21%, tendered of the $111,496,000 outstanding 7.75% notes due 2032 (Cusip: 92344GAS5) for a total consideration of $1,379.82, based on an offer yield of 3.347%. Pricing was calculated using the 1.875% U.S. Treasury due Feb. 15, 2032 plus 155 bps;

• $9,286,000, or 8.54%, tendered of the $108,723,000 outstanding 7.375% debentures due 2032 issued by subsidiary Verizon New York Inc. (Cusip: 92344XAB5) for a total consideration of $1,341.65, based on an offer yield of 3.347%. Pricing was calculated using the 1.875% U.S. Treasury due Feb. 15, 2032 plus 155 bps;

• $2,651,000, or 4.53%, tendered of the $58,498,000 outstanding 7.875% notes due 2032 issued by subsidiary Alltel Corp. (Cusip: 020039DC4) for a total consideration of $1,392.03, based on an offer yield of 3.347%. Pricing was calculated using the 1.875% U.S. Treasury due Feb. 15, 2032 plus 155 bps;

• $1.21 million, or 1.12%, tendered of the $108,368,000 outstanding 8.95% notes due 2039 (Cusip: 92343VAR5) for a total consideration of $1,630.13, based on an offer yield of 3.857%. Pricing was calculated using the 2% U.S. Treasury due Nov. 15, 2041 plus 155 bps;

• $2 million, or 1.94%, tendered of the $103,014,000 outstanding 7.875% notes due 2032 (Cusip: 92343VEM2) for a total consideration of $1,392.03, based on an offer yield of 3.347%. Pricing was calculated using the 1.875% U.S. Treasury due Feb. 15, 2032 plus 155 bps;

• $30,992,000, or 21.64%, tendered of the $143,195,000 outstanding 7.35% notes due 2039 (Cusip: 92343VAU8) for a total consideration of $1,433.65, based on an offer yield of 3.857%. Pricing was calculated using the 2% U.S. Treasury due Nov. 15, 2041 plus 155 bps;

• $20,485,000, or 11.86%, tendered of the $172.7 million outstanding 6.9% notes due 2038 (Cusip: 92343VAP9) for a total consideration of $1,362.39, based on an offer yield of 3.857%. Pricing was calculated using the 2% U.S. Treasury due Nov. 15, 2041 plus 155 bps;

• $31,448,000, or 8.16%, tendered of the $385,602,000 outstanding 6.4% notes due 2033 (Cusip: 92343VBS2) for a total consideration of $1,295.34, based on an offer yield of 3.297%, calculated using the 1.875% U.S. Treasury due Feb. 15, 2032 plus 150 bps;

• $104,578,000, or 37.80%, tendered of the $276,645,000 outstanding 6.4% notes due 2038 (Cusip: 92343VAK0) for a total consideration of $1,307.61, based on an offer yield of 3.807%, calculated using the 2% U.S. Treasury due Nov. 15, 2041 plus 150 bps;

• $33,555,000, or 12.21%, tendered of the $274,853,000 outstanding 6.25% notes due 2037 (Cusip: 92343VAF1) for a total consideration of $1,320.18, based on an offer yield of 3.497%, calculated using the 1.875% U.S. Treasury due Feb. 15, 2032 plus 170 bps;

• $7,166,000, or 1.68%, tendered of the $427,379,000 outstanding 5.85% notes due 2035 (Cusip: 92344GAX4) for a total consideration of $1,264.10, based on an offer yield of 3.397%, calculated using the 1.875% U.S. Treasury due Feb. 15, 2032 plus 160 bps;

• $1.78 million, or 1.26%, tendered of the $140,865,000 outstanding 5.125% debentures due 2033 issued by subsidiary Verizon Maryland LLC (Cusip: 92344WAB7) for a total consideration of $1,165.69, based on an offer yield of 3.347%, calculated using the 1.875% U.S. Treasury due Feb. 15, 2032 plus 155 bps;

• $268,000, or 0.22%, tendered of the $122,405,000 outstanding 6% notes due 2041 (Cusip: 92343VAW4) for a total consideration of $1,287.34, based on an offer yield of 3.857%, calculated using the 2% U.S. Treasury due Nov. 15, 2041 plus 155 bps;

• $113,229,000, or 13.55%, tendered of the $835.79 million outstanding 4.672% notes due 2055 (Cusip: 92343VCZ5) for a total consideration of $1,175.87, based on an offer yield of 3.74%, calculated using the 1.875% U.S. Treasury due Nov. 15, 2051 plus 152 bps;

• $31,137,000, or 3.77%, tendered of the $825,118,000 outstanding 5.012% notes due 2054 (Cusip: 92343VCM4) for a total consideration of $1,237.90, based on an offer yield of 3.74%, calculated using the 1.875% U.S. Treasury due Nov. 15, 2051 plus 152 bps;

• $1,833,000, or 0.23%, tendered of the $805,189,000 outstanding 6.55% notes due 2043 (Cusip: 92343VBT0) for a total consideration of $1,400.44, based on an offer yield of 3.807%, calculated using the 2% U.S. Treasury due Nov. 15, 2041 plus 150 bps;

• $196,698,000, or 15.23%, tendered of the $1,291,758,000 outstanding 5.25% notes due 2037 (Cusip: 92343VDU5) for a total consideration of $1,219.22, based on an offer yield of 3.377%, calculated using the 1.875% U.S. Treasury due Feb. 15, 2032 plus 158 bps;

• $75.77 million, or 14.21%, tendered of the $533,109,000 outstanding 5.5% notes due 2047 (Cusip: 92343VDV3) for a total consideration of $1,282.45, based on an offer yield of 3.75%. Pricing was calculated using the 1.875% U.S. Treasury due Nov. 15, 2051 plus 153 bps;

• $863,055,000, or 28.77%, tendered of the $3 billion outstanding 4.5% notes due 2033 (Cusip: 92343VEA8) for a total consideration of $1,125.86, calculated using an offer yield of 3.177%. Pricing was based on the 1.875% U.S. Treasury due Feb. 15, 2032 plus 138 bps;

• $386,344,000, or 16.98%, tendered of the $2,274,789,000 outstanding 4.4% notes due 2034 (Cusip: 92343VCQ5) for a total consideration of $1,111.73, based on an offer yield of 3.277%. Pricing was calculated using the 1.875% U.S. Treasury due Feb. 15, 2032 plus 148 bps and the first par call date;

• $23,114,000, or 11.77%, tendered of the $196,306,000 outstanding 5.05% notes due 2034 (Cusip: 92343VBZ6) for a total consideration of $1,159.26, based on an offer yield of 3.397%. Pricing was calculated using the 1.875% U.S. Treasury due Feb. 15, 2032 plus 160 bps and the first par call date;

• $82,368,000, or 14.45%, tendered of the $570,169,000 outstanding 4.75% notes due 2042 (Cusip: 92343VBE3) for a total consideration of $1,135.54, based on an offer yield of 3.767%. Pricing was calculated using the 2% U.S. Treasury due Nov. 15, 2041 plus 146 bps;

• $168,659,000, or 15.40%, tendered of the $1,095,517,000 outstanding 4.125% notes due 2046 (Cusip: 92343VDC5) for a total consideration of $1,064.61, calculated using an offer yield of 3.72%. Pricing was based on the 1.875% U.S. Treasury due Nov. 15, 2051 plus 150 bps; and

• $151,954,000, or 17.52%, tendered of the $867,453,000 outstanding 3.85% notes due 2042 (Cusip: 92343VBG8) for a total consideration of $1,017.28, calculated using an offer yield of 3.727%. Pricing was based on the 2% U.S. Treasury due Nov. 15, 2041 plus 142 bps and was calculated using the first par call date.

In each series, the total consideration included a $50 early tender premium per $1,000 note. Pricing was determined at 9 a.m. ET on March 7.

Investors also received unpaid interest to the settlement date.

Early settlement was expected for the third business day after the early expiration deadline, March 9.

The offers expired at 5 p.m. ET on March 21, previously extended from March 17.

However, because the waterfall cap had already been exceeded, no additional tenders were accepted, and there was no final settlement date.

Verizon is a New York-based telecommunications company.

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