Verizon Underwriting process

Verizon:
Verizon Communications, branded as Verizon, is an American broadband and telecommunications
company and a corporate component of the Dow Jones Industrial Average.
Verizons Issue:
Verizon Communications priced a massive $49 billion bond offering, the largest corporate debt offering

Vodafone Group Plc.

(VOD)s 45 percent stake. The sale is more than double the previous issuance
record of $17 billion from Apple Inc. sold in April.
ever. This offer was issued to help finance $130 billion buyout of partner

The company sold a mix of three-year, five-year, seven-year, 10-year, 20-year and 30-year
maturities. Initially when it decided to issue offer, it received $90 worth of orders from
investors.The company initially expected to sell about $20 billion of debt but in a week increased
target repeatedly and orders kept flowing in.The final size was at the top end of the $45-$49
billion range that market sources flagged late on Tuesday following overwhelming demand in
excess of $100 billion.
The huge issue amount shows liquidity in market.
Multiple things combined to make this deal a success:
10 year Verizon bond was expected to yield 2.25%age points more than comparable
Treasuries.
Previously record low interest rates were now on rise so it was opportunity for investors to invest
in long term higher yield bonds who had to previously invest more in marketable securities or in
cash.
Underwriting Deal:
This was a large bond offering and the time available to raise money, so Verizon decided to pay
a high fee to the underwriters of the deal. There were 13 banks involved in the Underwriting
deal.
The four banks who wrote 15.7% each of the deal summing up to 62.8% were:
1.
2.
3.
4.

JP Morgan Chase and Co.

Morgan Stanley
Barclays PLC
Bank of America Corp.

JP Morgan and Morgan Stanley were lead financial advisors. JP morgan was administrative
agent and Morgan Stanley and JP Morgan were global coordinators.

Other banks that each handled 4.8 percent of the bond offering
were Citigroup Inc. (C), Credit Suisse Group AG (CSGN), Mizuho
Financial Group Inc. (8411), Mitsubishi UFJ Financial Group Inc., Royal
Bank of Canada, Royal Bank of Scotland Plc and Wells Fargo & Co. (WFC),
the filing shows. Deutsche Bank and Banco Santander SA each underwrote
1.8 percent of the deal.
Underwriting fee:
Verizon paid $265.3 million in fees to these underwriters. With the four banks writing
68.2% getting $41.6 million apiece. The fees were 0.541% of the amount underwritten
by each bank. exceeding the average 0.486 percent paid on offerings of

investment-grade U.S. corporate bonds this year. Verizons fees are about
five times what Apple paid for its April offering, which was approximately onethird the size of Verizons. Apples $53.25 million in fees amounted to 0.313
percent of the funds raised. Goldman Sachs Group Inc. (GS) and Deutsche
Bank AG led that offering.
Bridge Loan
The four primary banks on todays deal also generated revenue as advisers
on the deal and lenders on Verizons $61 billion bridge loan, which funded the
$58.9 billion in cash that Verizon agreed to pay Vodafone. Verizon said earlier
this month that it planned to bring down the size of the bridge commitment
with the bond issuance.
When Verizon announced $130 billion deal, the 4 banks agreed to provide a
$61 billion bridge loan that would tide the company over if necessary until
more permanent capital in the form of bonds and term loans could be in place.
It was 364 day billion bridge loan. Including $49 billion corporate bonds and
$14 billion loans further divided into 2 billion revolving credit and 12 billion
term loans.