On Thursday, AT&T (NYSE:$T) launched a massive bond sale in order to help finance its $85 billion acquisition of Time Warner (NYSE:$TWX). Many speculate the sale will net roughly $15 billion.
If this were to happen, it would mark the second largest bond offering among media, telecom, and technology companies since Microsoft’s (NASDAQ:$MSFT) $17 billion offering in January.
Regulatory filings suggest as many as seven different maturities, such as floating and fixed rate securities. Based on S&P’s LCD News, the original estimates are as followed: the five-year maturities will yield above 3% and the longer-term maturities will be above the 5% mark.
As of right now, AT&T’s stock yield is 4.98%.
Bond research firm CreditSights has an outperform rating on the Dallas, Texas-based company and thinks these bonds “should trade well after issuance.” One analyst wrote, “We expect strong demand for the Notes, as issuance has been light in July.”
The filing states:
“We intend to use the net proceeds of this offering for general corporate purposes, including funding the cash consideration for the Time Warner acquisition. This offering is not contingent on the consummation of the acquisition of Time Warner. However, if such acquisition is not consummated on or prior to April 22, 2018 or, if prior to such date, the Merger Agreement for such acquisition is terminated, then in either case we will be required to redeem all of the Notes at a special mandatory redemption price equal to 101% of the principal amount of the Notes, plus accrued but unpaid interest to, but excluding, the redemption date.”
It’s important to note that AT&T shares have increased sharply since they reported Q2 revenue in line with expectations and beat on the bottom line. Additionally, it reported low churn, subscriber increases, and record profit margins.
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