For setting records for the debt markets, it appears that telecommunications companies can’t be beat.
Sprint Nextel on Wednesday sold $6.5 billion worth of high-yield bonds, breaking the record for the single biggest noninvestment-grade offering ever sold directly to investors. The sale comes only days after Verizon Communications announced that it has taken out $61 billion in financing to support its mammoth deal to buy full control of its wireless unit.
The sale shows that despite concerns about the Federal Reserve raising rates at some point in the near future, debt investors remain interested in buying up new issuances.
“We didn’t wake up thinking we would do the biggest high-yield offering ever,†Joseph J. Euteneuer, Sprint’s chief financial officer, said in a telephone interview on Wednesday, adding praise for the performance of its adviser, JPMorgan Chase.
At $6.5 billion, the Sprint offering surpasses Freeport’s $6 billion junk-bond offering in 2007 and Freescale Semiconductor’s $5.95 billion note sale the prior year. While at least three mega-leveraged buyouts were bigger than Sprint’s on Wednesday, the offerings were held by the underwriting banks and weren’t sold to investors.
In Wednesday’s offering, Sprint sold two tranches worth of notes: $2.25 billion worth of bonds due in 2021, at a coupon of 7.5 percent, and $4.25 billion worth of bonds due in 2013, with a coupon of 7.875 percent.
With the sale, Sprint is planning to retire about $3 billion worth of debt owed by Clearwire, a wireless network operator that the phone company agreed to buy earlier this year. The telecommunications company plans to negotiate so that it can repay an additional $1 billion owed by its newest acquisition, according to people briefed on the matter.
Sprint had initially planned to sell bonds in early August, but the markets then proved less welcoming to such a big offering. The company and JPMorgan instead decided to bide their time, up to a point.
“We thought about it in August, but it wasn’t the right time,†Mr. Euteneuer said. “Knowing we have the Clearwire debt, though, we wanted to get it done sooner.â€
During a call with more than 100 investors on Wednesday, Mr. Euteneuer outlined Sprint’s capital-expenditure plans, including about $8 billion next year. He also spoke of the operating improvements that Sprint has undertaken, especially since agreeing to sell a majority stake to SoftBank of Japan. The phone service provider is speaking regularly to its highly regarded new parent, including video conferences every week and in-person meetings at least once a month.
“There’s been great performance from the company to date,†Mr. Euteneuer said in the telephone interview.
Ultimately, while Sprint envisioned holding a series of bond offerings to raise its desired cash, potential investors signaled that they would prefer one big offering and ensuring that the telecom had the money in hand right away.
