Verizon's $130 billion acquisition of Vodafone's Verizon Wireless stake last week marked the biggest deal in communications history. What's even more interesting is the biggest bond financing in corporate history: Verizon sold $49 billion in debt yesterday to pay for the deal.
What to think of the deal? It's cynical financial engineering. It's dangerous. But it makes a lot of sense for Verizon. And it should scare everybody about the potential ramifications of the unintended consequences of the Federal Reserve's artificially low interest rates.
Verizon was clearly taking advantage of a low-rate environment to lock in cheap debt, selling $49 billion of bonds yesterday, issuing a mixture of bonds ranging from 3 years to 30 years in maturity. Interest rates on the debt ranged from 5.15% notes due in 2023 to 6.55% on debt due in 2043. In bond parlance, the spread on the rates over treasury rates was generally around 1.5%-2%.
Now, 2043 -- that's hilarious. What kind of iPhone will be sold in 2043, I wonder?
It's by far the largest corporate debt issuance in history, dwarfing Apple's mere $17 billion in corporate debt issues in April.