28 International Financing Review April 4 2020T-Mobile raises US$19bn in
long-awaited M&A bond
Funding for Sprint merger finally comes to fruition
After nearly three years of legal wrangling
and rumoured bond issuance, telecoms
company T-MOBILEûCAMEûTOûTHEû53ûHIGH
GRADEû
market on Thursday to raise debt for its
merger with SPRINT.
4HEû53BNûMERGERûTHATûWASûlRSTû
ANNOUNCEDûINû*UNEûûANDûCOMPLETEDûONû
!PRILû ûOFlCIALLYûMAKINGû4
-OBILEûTHEûTHIRD
LARGESTûWIRELESSûPROVIDERûINûTHEû53û
4
-OBILEûRAISEDû53BNûONû4HURSDAYû
AFTERûLAUNCHINGûAûlVE
PARTûDEALûTHATûWILLû
cover in full a bridge loan set up earlier in
the week.
While T-Mobile is a high-yield company
with Ba3/BB/BB+ senior unsecured ratings,
Thursday’s deal carried investment-grade
ratings of Baa3/BBB–/BBB, thanks to the
bonds senior secured status.
/RDERûBOOKSûPEAKEDûATû53BN ûQUICKLYû
erasing doubts over whether T-Mobile could
RAISEûTHEûFULLû53BNûINûTHEûDOLLARûMARKETû
at a time when coronavirus-driven volatility
continues to weigh on sentiment.
Indeed, the company played it safe on
Wednesday’s investor calls, talking a smaller
SIZEûOFû53BNnBNû3OMEûHADûALSOû
thought it might even have to go to the euro
market to top up what it lacked in dollar
funding.
Despite such doubts, record volumes in
the primary market have proved that
investors still have plenty of money to put to
work even as the asset class suffers massive
OUTmOWSû
Earlier this week, tech company ORACLE
UPSIZEDûAû53BNûDEALûTOû53BNûATû
LAUNCH ûTHOUGHûTHEûHIGHER
RATEDû3INGLEû!û
credit offered a sizeable 30bp new-issue
concession to take out that size.
T-Mobile, on the other hand, started
initial price talk tighter than some investors
had expected and tightened by 37.5bp–
50.5bp at launch, causing an inverted spread
at the long end.
Bookrunners Barclays and Deutsche Bank
LAUNCHEDûAû53BNûlVE
YEARûATûBPûOVERû
4REASURIES ûAû53BNûSEVEN
YEARûATûBP û
53BNû
YEARûATûBPûANDûAû53BNû
YEARûANDû53BNû
YEARûATûBPûOVERû
h4HEûMARKETûWASûHOPINGûTHATûONûAû
YEARû
it would come at initial price talk of 400bp
and then price in the mid-300s, so initial talk
ONûTHEû3TREETûISûITSûCOMINGûTIGHTERûTHANû
expectations,” one investor said.
“In general, we think their pricing is
ambitious given the amount of execution
risk for the transaction,” said another.RATINGS
On the one hand, it makes sense that
demand would be strong for T-Mobile.
Money has long been set aside for this
highly telegraphed deal and telecoms names
are considered exceptionally well positioned
to navigate the economic downturn caused
by the coronavirus outbreak.
Cruise line Carnival (rated Baa2/BBB–) is in
a severely distressed sector, but still
MANAGEDûTOûPRICEûAû53BNûDEALûSEEû4OPû
News), so a telecoms name with investment-
grade aspirations should have no problem,
said David Knutson, head of credit research
ATû3CHRODERS
h4
-OBILEûBENElTSûFROMûLIMITEDûDIRECTû
#OVID
ûRISK ûWHICHûWEûEXPECTûTOûBEûAûKEYû
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noted in a report.
On the other hand, the high-yield
company is issuing into a much weaker
market than it intended nearly three years
ago and has a lot to prove as the two entities
combine.
"OTHû30ûANDû-OODYSûEXECUTEDûEXPECTEDû
one-notch downgrades on the completion of
the merger, noting that leverage would rise
to the four times debt-to-Ebitda level this
year from around 2.6 times.
“Cost synergies will be offset by near-term
integration expense and higher churn on the
LEGACYû3PRINTûNETWORK ûRESULTINGûINûLIMITEDû
%BITDAûGROWTHûANDûFREEûOPERATINGûCASHmOWû
GENERATION vû30ûWROTEûINûITSûREPORTû
“These factors will likely constrain
leverage improvement over the next year.”PEER COMPARISON
&INALûSPREADSûLANDEDûWIDEûOFû!44SûCURVEû
but tight to Charter Communications’
secured curve, according to MarketAxess
data.
&ORûEXAMPLE û!44SûûSûRATEDû
Baa2/BBB/A–) were seen trading around
292bp over Treasuries last week – 33bp
tighter than where T-Mobile landed its new
30-year bond.
However, a more apt comparison was the
more similarly rated Charter (Ba2/BB+)
secured curve, which most investors
accurately predicted T-Mobile would price
through.
Charter’s 4.8% 2050s were trading around
BPûOVER ûORûBPûWIDEûOFûWHEREû4
-OBILEû
priced. However, secondary movement on
Thursday had the note tightening more.
William HoffmanWEEK IN NUMBERS
€57bn
THE ORDER BOOK THAT BELGIUM
SECURED FOR AN €8bn OCTOBER 2027
ISSUE, THE BIGGEST EVER IN THE SSA
SECTOR EXCLUDING EMERGING MARKETSUS$256.47bn
THE AMOUNT OF ISSUANCE IN THE
US HIGH-GRADE MARKET, COMPRISING
CORPORATES AND FINANCIALS, IN
MARCH. THIS IS A NEW MONTHLY RECORDUS$485.945bn
QUARTERLY ISSUANCE IN THE US
HIGH-GRADE MARKET, WHICH ALSO
REACHED A NEW HIGH, OVERTAKING THE
US$399.031bn SET FROM Q1 2017€92.8bn
THE AMOUNT OF BBB– RATED EURO
DEBT IN THE AUTO SECTOR ALONE,
ACCORDING TO BANK OF AMERICA, WHICH
IS ALMOST 30% OF THE ENTIRE HIGH-
YIELD UNIVERSE€1.285bn
THE AMOUNT OF CORPORATE BONDS
THE ECB BOUGHT (NET) IN THE WEEK
TO MARCH 27 AS PART OF ITS CSPP
COMPARED WITH €2.079bn THE WEEK
EARLIER
In total, it has bought €18.834bn0102030405060Spain
Apr 2029Spain
Jan 2030Belgium
Oct 2027€bn0100200300400500Q1 2020 Q1 2017 Q2 2015US$bn6 IFR Bonds 2327 p 25 - 65 .indd 28 03 / 04 / 2020 20 : 28 : 58