Vodafone Postpones a Bond Sale
November 23 2015 - 6:01PM
Dow Jones News
By Mike Cherney
British telecommunications firm Vodafone Group PLC postponed a
U.S. debt sale on Monday, the latest sign of weakness in the bond
market amid worries about the pace of economic growth.
Vodafone was looking to sell bonds that mature in 30 years,
though no size had been set for the deal. It could still decide to
proceed with a bond sale at a later date. A company spokesman
declined to comment.
Analysts said investors were concerned Vodafone, which bought
Spanish telecom firm Grupo Corporativo Ono SA last year and has
been downgraded by credit-rating firms over the past 18 months,
could seek to make more acquisitions and take on even more debt,
hurting the value of the company's outstanding bonds. That concern
was likely increased by recent news of other large acquisitions,
such as the $155 billion deal announced Monday to combine Pfizer
Inc. with Allergan PLC.
Vodafone on Monday offered to increase the interest rate on its
new bonds should the company be downgraded below investment grade,
an unusual step given how easy it has been for companies to sell
new bonds in recent years. Firms have been selling bonds at a
record pace as investors, seeking interest rates higher than what
was available on low-risk government debt, piled into corporate
bonds.
Vodafone's new bonds were expected to be rated in the triple-B
area, the lowest category of investment grade. The bond was
expected to yield about 2.50 percentage points more than benchmark
U.S. Treasurys. An outstanding 2043 bond from Vodafone traded
Monday at about 86 cents on the dollar, down from 88.1 cents last
week, according to MarketAxess.
Some analysts have started questioning the health of the
corporate debt market, saying companies could have problems
repaying debts if the global economy slows down. Defaults are
expected to increase in the coming months and more companies are
getting downgraded by credit-rating firms.
Last week, Veritas postponed a debt deal financing the firm's
leveraged buyout by private-equity firm Carlyle Group LP, which was
buying Veritas from cybersecurity firm Symantec Corp., according to
S&P Capital IQ LCD. Some corporate-bond sales were also
postponed at the end of September during turmoil in financial
markets.
"It is a little bit of a warning sign," said Brian Kloss,
portfolio manager at Brandywine Global Investment Management. "You
need to be cautious at this point." Mr. Kloss said his firm wasn't
considering the Vodafone deal because of heightened
mergers-and-acquisitions activity in the telecom sector.
Still, some analysts said investors' concerns were limited to
Vodafone and didn't reflect broader worries. Other companies
successfully sold bonds on Monday, including Lloyds Banking Group
PLC and MetLife Inc., indicating that debt markets remain open for
new bond deals.
Write to Mike Cherney at mike.cherney@wsj.com
(END) Dow Jones Newswires
November 23, 2015 17:46 ET (22:46 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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