* Verizon follows Danone with jumbo trade
* ECB lures M&A funding to Europe
By Laura Benitez
LONDON, Oct 26 (IFR) - Verizon is raising at least 3bn-equivalent of bonds hot on the heels of Danone's 6.2bn blockbuster deal, as the European bond market becomes the new hotbed for M&A debt financing.
Cheaper funding costs and increased demand have enticed companies into the European bond market since the ECB launched its corporate sector purchase programme (CSPP) on June 8.
Even borrowers that are not eligible for the programme, such as Verizon Communications are reaping the benefits from a rally in spreads across the euro bond universe.
But bankers were still left surprised that the US issuer opted to issue so much paper in euro and sterling, as borrowers tend to lean heavily on the US market for large M&A deals.
Danone's decision to issue 6.2bn on Tuesday provoked a similar reaction, particularly as the French firm is acquiring US business WhiteWave Foods. This was the largest euro M&A bond since global brewer AB InBev's 13.25bn bond in March this year.
The attractiveness of the European market is underscored by the fact Verizon will swap the proceeds of Wednesday's deal back to US dollars, according to market sources, to help finance various recent acquisitions such as Yahoo.
The company told investors during its meetings last month that its long-term strategy was to diversify its funding sources.
It opted to issue in euros and sterling to avoid tapping the US dollar market twice in one year, after selling bonds there in July.
TALK IS CHEAP
Verizon telegraphed its intention to issue euro and sterling through investor meetings at the end of last month. However, some thought the timing could be jeopardised due to soured sentiment after a large data breach at Yahoo, as well as the more recent news of AT&T planned merger with Time Warner.
"It was unclear how this would effect the price of their existing bonds, but the news hasn't had that much of an impact and investors had been waiting for it, so they were right to press on," one banker away from the deal said.
However, those hoping that Verizon would offer extra yield to compensate for the recent negative headlines around the sector were left disappointed.
Spreads were set at 50bp over mid-swaps on the long five-year euro, at 65bp over swaps on a long eight-year euro, 83bp over swaps on a 12-year euro, and at Gilts plus 155bp on a sterling 19-year.
Guidance was 55bp area, 70bp area, 85-90bp, and 155-160bp, which was significantly tighter than initial price thoughts of 60-65bp, 75-80bp over mid-swaps, 95-100bp and 160-165bp respectively.
Investors and bankers away estimated a scant 15bp premium at initial price talk, and around five at the latest update.
Verizon's multi-currency transaction is expected to be around 3bn-equivalent, although the company told investors during its roadshow last month that it could upsize the deal on strong demand.
Expected ratings on the senior, unsecured, SEC registered deal are Baa1/BBB+/A-.
The deal will price later today via Barclays, Citigroup (B&D on the sterling), JP Morgan (B&D on the euro) and UBS.
(Reporting By Laura Benitez) ((laura.benitez@thomsonreuters.com; +44 20 7542 2468;))
* ECB lures M&A funding to Europe
By Laura Benitez
LONDON, Oct 26 (IFR) - Verizon is raising at least 3bn-equivalent of bonds hot on the heels of Danone's 6.2bn blockbuster deal, as the European bond market becomes the new hotbed for M&A debt financing.
Cheaper funding costs and increased demand have enticed companies into the European bond market since the ECB launched its corporate sector purchase programme (CSPP) on June 8.
Even borrowers that are not eligible for the programme, such as Verizon Communications are reaping the benefits from a rally in spreads across the euro bond universe.
But bankers were still left surprised that the US issuer opted to issue so much paper in euro and sterling, as borrowers tend to lean heavily on the US market for large M&A deals.
Danone's decision to issue 6.2bn on Tuesday provoked a similar reaction, particularly as the French firm is acquiring US business WhiteWave Foods. This was the largest euro M&A bond since global brewer AB InBev's 13.25bn bond in March this year.
The attractiveness of the European market is underscored by the fact Verizon will swap the proceeds of Wednesday's deal back to US dollars, according to market sources, to help finance various recent acquisitions such as Yahoo.
The company told investors during its meetings last month that its long-term strategy was to diversify its funding sources.
It opted to issue in euros and sterling to avoid tapping the US dollar market twice in one year, after selling bonds there in July.
TALK IS CHEAP
Verizon telegraphed its intention to issue euro and sterling through investor meetings at the end of last month. However, some thought the timing could be jeopardised due to soured sentiment after a large data breach at Yahoo, as well as the more recent news of AT&T planned merger with Time Warner.
"It was unclear how this would effect the price of their existing bonds, but the news hasn't had that much of an impact and investors had been waiting for it, so they were right to press on," one banker away from the deal said.
However, those hoping that Verizon would offer extra yield to compensate for the recent negative headlines around the sector were left disappointed.
Spreads were set at 50bp over mid-swaps on the long five-year euro, at 65bp over swaps on a long eight-year euro, 83bp over swaps on a 12-year euro, and at Gilts plus 155bp on a sterling 19-year.
Guidance was 55bp area, 70bp area, 85-90bp, and 155-160bp, which was significantly tighter than initial price thoughts of 60-65bp, 75-80bp over mid-swaps, 95-100bp and 160-165bp respectively.
Investors and bankers away estimated a scant 15bp premium at initial price talk, and around five at the latest update.
Verizon's multi-currency transaction is expected to be around 3bn-equivalent, although the company told investors during its roadshow last month that it could upsize the deal on strong demand.
Expected ratings on the senior, unsecured, SEC registered deal are Baa1/BBB+/A-.
The deal will price later today via Barclays, Citigroup (B&D on the sterling), JP Morgan (B&D on the euro) and UBS.
(Reporting By Laura Benitez) ((laura.benitez@thomsonreuters.com; +44 20 7542 2468;))
