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UPDATE 1-Investors expect AT&T to hit debt market
May 2, 2017 / 1:20 PM / 7 months ago

UPDATE 1-Investors expect AT&T to hit debt market

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By Laura Benitez

LONDON, May 2 (IFR) - AT&T is expected to tap the European bond market soon to help finance its US$85.4bn acquisition of Time Warner, according to several market participants.

AT&T is holding European meetings for a ‘non-deal’ investor update from May 2 via Bank of America Merrill Lynch and BNP Paribas.

Those banks said the meetings will only be used to update investors and are not linked to new bond issuance.

However, market participants are already speculating that AT&T is getting the ball rolling for a jumbo transaction, expected to be a mix of euro and US dollar debt.

“Everyone is eyeing up the US$30bn bridge and assuming they’ll address some of that in euros,” said one investor due to meet with the company later today.

Another investor that met with AT&T earlier on Tuesday told IFR that he expected to see a deal in the near term.

“Reading into it, yes, they will start to refinance that US$30bn shortly in the bond market.”

A spokesperson at AT&T declined to comment about a possible bond issue.

The wireless giant announced that it had agreed to buy Time Warner Inc in October last year, and said it would finance the cash portion of the acquisition with debt and cash on its balance sheet.

AT&T has an 18-month bridge loan for US$30bn maturing in May 2018, according to Thomson Reuters data.

Companies have typically taken out bridge loans with bonds soon after announcing acquisitions in recent years due to strong market conditions and ultra low interest rates.

“If the world is still spinning in two/three weeks then we’ll see a euro bond from AT&T,” a banker not involved in the meetings said.

“AT&T typically don’t like doing bond roadshows and they were put off by Honeywell and United Technologies, who saw spreads widen massively after holding roadshows last year.”

AT&T was last in the European market in February 2015 with a €2.5bn dual-tranche deal. The €1.25bn Sep 2023 portion was bid at 59bp over mid-swaps on Tuesday, according to Tradeweb, having priced at plus 75bp. The company is rated Baa1/BBB+/A- by Moody‘s/S&P/Fitch (all on negative watch).

The Time Warner acquisition was approved by the European Commission in March.

“It’s moving along as expected. The European Commission has approved it. The Department of Justice is now reviewing it, and we’re working closely with them to answer any questions that they may have,” Randall L. Stephenson, AT&T’s chairman, CEO and President said on the company’s earnings call in April. (Reporting By Laura Benitez, editing by Alex Chambers and Julian Baker)

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