Credit: REUTERS/CARLO ALLEGRINEW YORK, Sept 25 (IFR) - T-Mobile enjoyed strong demand for its third high-grade bond of the year on Tuesday as it sought to pay down high-coupon debt originally issued in the junk market.
The telecoms company launched a US$4bn four-part deal, tapping its 2.05% 2028s and 2.55% 2031s and offering new 20 and 30-year bonds.
The new debt added to an already heavy year of issuance for T-Mobile, having now raised US$27bn of bonds year-to-date, according to IFR data.
Heavy supply did little to deter investor interest as order books peaked at US$19bn and closed at US$16.5bn, according to one lead banker.
T-Mobile made its investment-grade debut in April with a US$19bn five-part bond to fund its US$23bn acquisition of Sprint.
Despite merging with Sprint, T-Mobile's ratings remained in high-yield with BB/BB+ ratings from S&P and Fitch. Yet T-Mobile has made refinancing forays this year using secured bonds, which are rated Baa3/BBB–/BBB–.
In June the company added US$4bn of supply in a three-part deal designed to pay down unsecured notes.
"We had expected T-Mobile to be proactive refinancing its higher coupon HY debt given the potential for material interest savings," research firm CreditSights noted in a report.
"However, we have been surprised by the extent to which it has done this only in the IG markets."
Proceeds from Tuesday's offering is also slated for "refinancing existing indebtedness", according to a filing.
However, the filing makes no mention of the debt it plans to refinance. Nor was the deal being offered in conjunction with a tender offer as was the case with British American Tobacco, which was also out in the bond market, one dealer broker noted.
"I would have felt more comfortable with this deal if they announced a tender offer along with it," the dealer broker said.
"Nothing has been announced yet, but maybe they will make open market purchases."
While T-Mobile has little to no debt maturing this year or next year, it does have six bonds that carry coupons of 4.5%–6.5% that are callable into 2021, CreditSights noted.
FAIR VALUE
T-Mobile gave up some new-issue concession for the bonds at the front end given recent volatility in the market and its excessive supply this year, the dealer broker-dealer said.
However, demand was skewed to the long end, the lead banker noted, allowing bookrunners Barclays, JP Morgan, Morgan Stanley and RBC to bring the 20-year inside T-Mobile's curve.
"I do believe this deal will need to come with concessions since it is not essentially leverage neutral," the broker-dealer said.
"However, if book sizes get big, they will likely try to walk this in close to where secondaries were trading."
The US$500m eight-year and US$750m 10-year taps launched at 120bp and 140bp, respectively, the tight end of guidance of 125bp and 145bp (+/–5bp) and inside initial price thoughts of the 145bp and 165bp area.
That put them 3bp–5bp wide of secondary levels, where the 2.05% 2028s and 2.55% 2031s had respectively been trading at G-spreads of around 114.9bp and 137bp, according to MarketAxess data.
The new US$1.25bn 20-year launched at Treasuries plus 160bp, also at the tight end of guidance of 165bp (+/–5bp).
But leads failed to squeeze pricing all they could on the US$1.5bn 30-year, which came at 187.5bp, just short of the tight side of guidance of 190bp (+/–5bp).
Both, however, came well inside initial price thoughts of 190bp and 215bp area.
The new 20-year landed substantially inside T-Mobile's outstanding curve, where the 4.375% 2040s were at a G-spread of around 177.3bp, according to MarketAxess data.
The 30-year bond, on the other hand, came just a few basis points wide of secondary levels, where the 4.5% 2050s had been trading at a G-spread of 184.6bp earlier in the week.
Bookrunners were Barclays, JP Morgan, Morgan Stanley and RBC.
(This story will appear in the September 26 issue of IFR Magazine.)
((william.hoffman@thomsonreuters.com; 646 223 6141;))
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