Telefonica has issued a €1.75bn (US$2.4bn) hybrid bond which is split between two tranches yielding 5% and 5.875% respectively.
The Spanish incumbent has priced at par €750m of deeply subordinated guaranteed fixed rate reset securities, which are…
Telefonica has issued a €1.75bn (US$2.4bn) hybrid bond which is split between two tranches yielding 5% and 5.875% respectively.
The Spanish incumbent has priced at par €750m of deeply subordinated guaranteed fixed rate reset securities, which are non-callable for six years, and another €1bn which cannot be called until 2024.
The six-year notes have a 5% coupon, and this will rise by 3.804% after 2020, 4.054% from 2024, and 4.804% from 2040.
Meanwhile the 10-year notes carry interest at 5.875%, plus an additional 4.301% from 2024, which will rise by 5.051% from 2044.
Barclays, BBVA, Caixa BI, Goldman Sachs, Mizuho, RBS and Santander are managing the offering.
In ratings reports, both Moody’s and Fitch said they would treat the securities as 50% equity. Moody’s assigned the notes a Ba1 rating while Fitch gave a BBB-.
Moody’s analyst Carlos Winzer said it rated the notes two rungs below the operator’s Baa2 rating because the notes are deeply subordinated to other debt in the company’s capital structure. The paper will only rank senior to the incumbent’s share capital.
The offering is the Spanish telco’s third trip to the debt market so far this year. It priced €200m worth of floating rate notes in mid-March and sealed a €3bn five-year revolving credit facility in February.
It is Telefonica’s first hybrid issue since last November, when it raised €716m by offering sterling-denominated hybrid perpetual subordinated securities.
Telefonica ended 2013 with €47.6bn in net debt – almost €6bn less than it reported at the end of 2012.
