Verizon markets $61 billion bridge loan for Vodafone deal: sources

Mon Sep 2, 2013 10:24pm EDT
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By Michelle Sierra

NEW YORK (Reuters) - Verizon Communications Inc (VZ.N: Quote) has started syndicating the $61 billion bridge loan backing its $130 billion buyout of Vodafone Group's (VOD.L: Quote) stake in its U.S. wireless business, banking sources said, adding that some of the loan may actually be drawn upon due to its huge size.

The 364-day billion bridge loan will be refinanced with a permanent capital structure consisting of $49 billion of corporate bonds and $14 billion of loans, sources told Thomson Reuters. The loans will include a $2 billion revolving credit and $12 billion of term loans.

The massive bridge loan is being seen by many banks as a rare opportunity to make money from investment-grade lending. Underwriting fees for bridge loans are generally richer than those paid for more routine refinancings and fees increase further in the rare cases where bridge loans are drawn upon.

The sources said Verizon may have to draw upon the loan as it may not be able to issue the full $49 billion of bonds by the first quarter of 2014, when the underlying acquisition is expected to close.

Under the mostly cash and stock deal for Verizon to purchase the 45 percent of Verizon Wireless it does not own, Verizon will pay Vodafone $58.9 billion in cash, which will be backed by the loans.

JP Morgan Chase & Co (JPM.N: Quote), Morgan Stanley (MS.N: Quote), Bank of America (BAC.N: Quote) and Barclays are leading the financing and equally underwriting the deal. JP Morgan and Morgan Stanley are global coordinators of the financing and JP Morgan is the administrative agent.

The four have started talking to Verizon's other senior relationship banks that are expected to become co-arrangers of the bridge loan, the sources said. Some of the bridge loan may also be sold to relationship banks in a general syndication.

General syndication of the $2 billion revolving credit is expected to launch next week. The $12 billion term loans will be split evenly between a three-year loan and a five-year loan, the sources said.   Continued...

A Verizon wireless store is shown in Del Mar, California June 6, 2013. REUTERS/Mike Blake