Verizon sets pricing in waterfall offers for 17 series of GTE notes

By Susanna Moon

Chicago, Aug. 15 – Verizon Communications Inc. plans to issue $4,016,261,000 of new 3.376% notes due Feb. 15, 2025 as part of its private tender and exchange offers for 17 series of its and subsidiary GTE LLC’s notes.

Pricing for the new issue was set using the yield of the 2.125% U.S. Treasury security due July 31, 2024 at 11 a.m. ET on Aug. 14 plus 135 basis points, according to a company notice.

The company gave the early tender results in the offers in the morning on Aug. 14 and then provided an update in the tally with pricing later that day.

In the waterfall offers, Verizon raised the cap so that all of the notes tendered by the early participation date will be accepted for purchase, resulting in an increased waterfall cap.

As previously announced, Verizon is using a waterfall method to accept notes. There was a $2 billion cap that was then raised to $3 billion on the total cash Verizon will pay to purchase old notes, excluding accrued interest. There is also a $4 billion cap on the principal amount of new notes it will issue in exchange for old notes.

The company also said on Aug. 7 that the financing condition for the offer had been met through the issue of new debt securities that raised $3.94 billion.

By selling the new bonds, Verizon also satisfied the financing condition for the concurrent public tender offer.

Verizon announced the private tender offer on July 31, setting the expiration at 11:59 p.m. ET on Aug. 25.

When submitting tenders of old notes, holders had to participate in either the cash offer or the exchange offer for each series of notes they are tendering by electing (i) to receive only cash in the cash offer, (ii) to receive only new notes in the exchange offer, or (iii) a hybrid option to receive cash and, to the extent cash is unavailable due to the operation of the acceptance priority procedures in the cash offer, to receive the remainder of their consideration in new notes.

Early tender results

Holders had tendered the following amount under the three options as of the early deadline, with the total payment for each $1,000 principal amount of fixed rated notes set using a fixed spread over the bid-side price of the reference U.S. Treasury security at 11 a.m. ET on Aug. 14, listed as follows when relevant, with the notes listed in order of priority acceptance levels from 1 to 17:

• Verizon Communications Inc.’s $1.75 billion floating-rate notes due 2018 for $1,020 with $1,027,499,000 tendered under the cash option and 100% was accepted for purchase; $304,240,000 tendered under the notes option and 100% was accepted for purchase; and $70,328,000 tendered under the hybrid option and 100% was accepted for cash;

• Verizon Communications Inc.’s $500 million floating-rate notes due 2019 for $1,012.50 with $262,442,000 tendered under the cash option and 100% was accepted for purchase; $8,835,000 tendered under the notes option and 100% was accepted for exchange; and $4,693,000 tendered under the hybrid option and 100% was accepted for cash;

• Verizon Communications Inc.’s $400 million floating-rate notes due 2019 for $1,002.50 with $93,558,000 tendered under the cash option and 100% was accepted for purchase; $0 tendered under the notes option; and $0 tendered under the hybrid option;

• GTE LLC’s $294,121,000 6.84% debentures due 2018 priced at $1,035.47 using an offer yield of 1.448% based on 0.75% Treasury notes due April 15, 2018 plus 25 basis points with $20.68 million tendered under the cash option and 100% was accepted for purchase; $0 tendered under the notes option; and $1.8 million tendered under the hybrid option and 100% was accepted for cash;

• Verizon Communications Inc.’s $2,093,214,000 3.65% notes due 2018 priced at $1,021.77 using an offer yield of 1.604% using the 1% Treasury notes due Sept. 15, 2018 plus 35 bps with $811,639,000 tendered under the cash option and 100% was accepted for purchase; $8,628,000 tendered under the notes option and 100% was accepted for purchase; and $10.1 million tendered under the hybrid option and 100% was accepted for cash;

• Verizon Communications Inc.’s $310,701,000 2.55% notes due 2019 priced at $1,019.76 using an offer yield of 1.455% based on the 0.875% Treasury notes due June 15, 2019 plus 15 bps with $95.41 million tendered under the cash option and 100% was accepted for purchase; $2.07 million tendered under the notes option and 100% was accepted for purchase; and $6,962,000 tendered under the hybrid option and 100% was accepted for cash;

• Verizon Communications Inc.’s $586,742,000 1.375% notes due 2019 priced at $998.33 using an offer yield of 1.46% based on the 1.375% Treasury notes due July 31, 2019 plus 15 bps with $365,793,000 tendered under the cash option and 100% was accepted for purchase; $14,475,000 tendered under the notes option and 100% was accepted for purchase; and $43,795,000 tendered under the hybrid option;

• Verizon Communications Inc.’s $1,323,711,000 2.625% notes due 2020 priced at $1,023.96 using an offer yield of 1.648% based on the 1.5% Treasury notes due July 15, 2020 plus 20 bps with $660,715,000 tendered under the cash option and $272,686,000, or 41.30%, was accepted for purchase; $50.27 million tendered under the notes option and $59,539,000 was accepted under the exchange option; and $15,783,000 was tendered under the hybrid option and 41.3% was accepted for cash and 58.7% for exchange;

• Verizon Communications Inc.’s $1 billion 3.45% notes due 2021 priced at $1,049.39 using an offer yield of 2.013% based on the 1.875% Treasury notes due July 31, 2022 plus 25 bps with $427,096,000 tendered under the cash option and none was accepted for purchase; $107.55 million tendered under the notes option and $138,383,000 was accepted under the exchange option; and $30,833,000 tendered under the hybrid option and 100% was accepted for exchange;

• Verizon Communications Inc.’s $1 billion 1.75% notes due 2021 priced at $986.16 using an offer yield of 2.113% based on the 1.875% Treasury notes due July 31, 2022 plus 35 bps with $601,463,000 tendered under the cash option and none was accepted for purchase; $40,817,000 tendered under the notes option and $126,243,000 was accepted under the exchange option; and $85,428,000 tendered under the hybrid option and 100% was accepted for exchange;

• GTE LLC’s $193,079,000 8.75% debentures due 2021 priced at $1,243 using an offer yield of 2.613% based on 1.875% Treasury notes due July 31, 2022 plus 85 bps with $2,068,000 tendered under the cash option and none was accepted for purchase; $200,000 tendered under the notes option and $200,000 was accepted under the exchange option; and $0 tendered under the hybrid option;

• Verizon Communications Inc.’s $1.85 billion 3.5% notes due 2021 priced at $1,049.37 using an offer yield of 2.263% based on the 1.875% Treasury notes due July 31, 2022 plus 50 bps with $557,794,000 tendered under the cash option and none was accepted for purchase; $103,059,000 tendered under the notes option and $221,284,000 was accepted under the exchange option; and $118,225,000 tendered under the hybrid option and 100% was accepted for exchange;

• Verizon Communications Inc.’s $1.5 billion 3% notes due 2021 priced at $1,028.31 using an offer yield of 2.263% based on the 1.875% Treasury notes due July 31, 2022 plus 50 bps with $604,677,000 tendered under the cash option and none was accepted for purchase; $113.56 million tendered under the notes option and $273.07 was accepted under the exchange option; and $159.51 million tendered under the hybrid option and 100% was accepted for exchange;

• Verizon Communications Inc.’s $1.75 billion 2.45% notes due 2022 priced at $996.92 using an offer yield of 2.513% based on the 1.875% Treasury notes due July 31, 2022 plus 75 bps with $712,819,000 tendered under the cash option and none was accepted for purchase; $158,279,000 tendered under the notes option and $285,046,000 was accepted under the exchange option; and $126,769,000 tendered under the hybrid option and 100% was accepted for exchange;

• Verizon Communications Inc.’s $4 billion 4.5% notes due 2020 priced at $1,077.49 using an offer yield of 1.898% based on the 1.5% Treasury notes due July 15, 2020 plus 45 bps with $1,924,606,000 tendered under the cash option and none was accepted for purchase; $368,467,000 tendered under the notes option and $489,801,000 was accepted under the exchange option; and $121,334,000 tendered under the hybrid option and 100% was accepted for exchange;

• Verizon Communications Inc.’s $4.6 billion 4.6% notes due 2021 priced at $1,086.33 with $866.33 of new notes and $220 in cash using an offer yield of 2.113% based on the 1.875% Treasury notes due July 31, 2022 plus 35 bps with $365,302,000 tendered under the cash option and none was accepted for purchase; $50,499,000 tendered under the notes option and $165,158,000 was accepted under the exchange option; and $114,659,000 tendered under the hybrid option and 100% was accepted for exchange; and

• Verizon Communications Inc.’s $7,584,189,000 5.15% notes due 2023 priced at $1,126 with $996 of new notes and $130 in cash sing an offer yield of 2.876% based on the 2.125% Treasury notes due July 31, 2024 plus 85 bps with $2,157,552,000 tendered under the cash option and none was accepted for purchase; $907,280,000 tendered under the notes option and $1,881,291,000 was accepted under the exchange option; and $974,015,000 tendered under the hybrid option and 100% was accepted for exchange.

In each case the total amount includes an early participation payment for notes tendered by 5 p.m. ET on Aug. 11.

The early payment per $1,000 principal amount is $30 for each series, except the Verizon Communications Inc. 3.5% notes due 2021 for which it is $20 and the Verizon Communications Inc. 4.6% notes due 2021 and the Verizon Communications Inc. 5.15% notes due 2023 for which it is $50.

Holders will also receive accrued interest to the settlement date.

Tendered notes may not be withdrawn as of 5 p.m. ET on Aug. 11.

Alongside the private tender and exchange, Verizon is also offering to buy back its own notes and notes of several subsidiaries in 29 public cash tender offers with a cap of $1.5 billion.

Global Bondholder Services Corp. (866 470-3800 or 212 430-3774) is the information agent and the tender agent.

Verizon is a New York City-based telecommunications company.

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