Telecom Italia has priced a €750m subordinated hybrid bond as part of its previously-announced €3bn programme.
The Italian incumbent announced after market close yesterday that the 60-year, euro-denominated bond, which has a first call date in 2018,…
Telecom Italia has priced a €750m subordinated hybrid bond as part of its previously-announced €3bn programme.
The Italian incumbent announced after market close yesterday that the 60-year, euro-denominated bond, which has a first call date in 2018, had an issue price of 99.499%. The telco said the quality of the order book enabled it to price the issue at a lower yield than the initial guidance, which stood at 8%. The effective yield to the first call date is 7.875%.
The bond carries a coupon of 7.75%, matures on 20 March 2073 and will be callable every five years from 2018. A coupon step up of 25 basis points is set for 2023 and of 75 basis points for 2038.
The notes are to be listed on the Luxembourg Stock Exchange.
Telecom Italia, which briefly delayed the hybrid issue after the controversial Italian elections, said it expects rating agencies to consider half the hybrid issue as equity.
Barclays and JP Morgan were global coordinators for the transaction, while Banca IMI, Barclays, BNP Paribas, JP Morgan and Mediobanca were joint bookrunners.
Today, Fitch affirmed its long-term issuer default rating for Telecom Italia at BBB with a negative outlook.
The agency said the negative outlook reflects its concerns that the telco is dependent upon the weak Italian economy and, after the recently-announced dividend cut, has limited options to cut debt.
However, Fitch affirmed Telecom Italia’s investment grade BBB+ sovereign rating, saying its incumbent status “offsets some of its weak financial metrics”.
“If the domestic business can be stabilised and leverage remains under control, Fitch fundamentally views TI as investment grade,” the agency said.
Fitch also noted that the telco’s liquidity remains healthy and should allow it to cover debt maturities well into 2014.
Telecom Italia is the third European telco to issue hybrid bonds this year, after Telekom Austria and the Netherlands’ KPN.
The Italian telco announced in early February that it would launch a hybrid subordinated debt securities programme of up to €3bn over an 18-24 month period.
