October 24, 2016 / 2:52 PM / 3 years ago

AT&T, Time Warner bonds widen on merger news

Signage for an AT&T store is seen in New York October 29, 2014. REUTERS/Shannon Stapleton/File Photo

NEW YORK (IFR) - AT&T saw some of its shorter-term outstanding bonds widen sharply in secondary trade Monday after the telecoms giant announced a blockbuster US$85bn acquisition of Time Warner.

AT&T’s 2.8% 2021s were spotted at T+120bp, some 15bp wider than Friday’s close, according to one trading source, while its 4.125% 2026s were spotted at T+170bp or 7bp wider on the day.

Meanwhile Time Warner’s 2.95% 2026 were bid 17bp wider at T+140bp after the announcement of the deal, which still needs the approval of US regulators.

At the longer end of the curve, the trader said, AT&T’s 4.8% 2044s narrowed 2bp to T+228bp.

Analysts at CreditSights said Monday they calculated net leverage of the combined company to be around 3x, comparing to current net leverage of 2.3x at AT&T and 2.7% at Time Warner.

Chris Ucko, global head of research at CreditSights, said they expected AT&T bonds to see “substantial volatility” in trading Monday.

The acquisition is being backed by a US$40bn 18-month unsecured bridge loan, TRLPC reported.

JP Morgan and Bank of America Merrill Lynch are joint lead arrangers and bookrunners of the loan.

Reporting by Hillary Flynn and Mike Gambale; Editing by Marc Carnegie

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