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Hi-grade: Vodafone launches largest 2013 non-financial bond issue, at $6B

Vodafone today launched the largest non-financial corporate bond sale so far this year, a $6 billion, five-part offering set at the tight end of guidance, sources said. The deal includes $700 million of three-year floating-rate notes at L+38.5, along with $900 million of three-year fixed-rate notes at T+55, $1.4 billion of five-year notes at T+75, $1.6 billion of 10-year notes at T+105, and $1.4 billion of 30-year notes at T+130.

Of note, three financial borrowers – BAML, Goldman Sachs, and J.P. Morgan – each placed $6 billion, multi-tranche deals in January. Only seven issuers – all non-financial – placed larger issues last year. Intel was the most recent, with $6.175 billion in four parts in early December to back its aggressive share-repurchase program. AbbVie placed $14.7 billion a month earlier to facilitate its spin-off from Abbott Labs, in the largest deal last year and the biggest since 2009.

Launch levels for Vodafone’s fixed-rate tranches imply reoffer yields of roughly 0.95%, 1.59%, 3.04%, and 4.45%, respectively. Vodafone is on track to garner higher yields than in the September offering, reflecting both wider spreads and higher interim underlying yields.

The U.K.-based telecommunications company in September placed $2 billion of 1.25% notes due 2017 at T+62.5, or 1.31%, and $1 billion of 2.5% notes due 2022 at T+87.5, or 2.65%. The 2017 issue traded on Friday at T+53, or 1.38%, and at a G-spread of 63 bps, while the 2022 notes last traded on Thursday at T+82, or 2.77%, and at a G-spread of 89 bps, according to MarketAxess.

Of note, at the time of issuance, the 1.25% notes due 2017 were placed among the 10 lowest reoffer yields for a five-year tenor, according to LCD data.

On Thursday, Vodafone released weaker-than-expected quarterly numbers that showed decreasing revenue for the second consecutive quarter. One day earlier, speculation bubbled up that the company was reportedly interested in acquiring Italian broadband operator Fastweb, a subsidiary of Swisscom Italia, according to press reports.

Proceeds from the proposed sale will be used for general corporate purposes. The issue, which has an expected A-/A3/A- profile, is being marketed by Barclays, HSBC, J.P. Morgan, Mitsubishi, and Morgan Stanley.

For reference, the company’s next long-term, fixed-rate, U.S. dollar-denominated maturity is $1 billion of 5% notes due December 2013. – Gayatri Iyer

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