Verizon Wireless in $17bn loan

By Francesco Guerrera and Paul Taylor in New York

Published: December 10 2008 23:27 | Last updated: December 10 2008 23:27

The moribund market for corporate finance received a boost on Wednesday when Verizon Wireless, a joint venture between Verizon Communications and Vodafone Group, closed a $17bn syndicated loan, the largest in the US this year.

The deal, arranged by Morgan Stanley, Bank of America and Citigroup, will enable Verizon Wireless to refinance the debt it took on in June when it bought Alltel, a regional telecoms group, for $28.1bn from TPG and Goldman Sachs.
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The one-year loan, which was syndicated to a dozen US and foreign financial institutions, is a rare sign of life in a market that has been paralysed by banks’ unwillingness to extend financing at a time of extreme financial turmoil.

Wall Street banks have been criticised by politicians for failing to resume lending to companies and consumers despite receiving billions of taxpayers’ dollars in recent months.

But bankers said the decision by Morgan Stanley, BofA and Citi to arrange the loan underlined the fact that many financial groups remained open to lending to their best customers and at the right price. People close to the situation said the loan would pay an interest rate of around 3 per cent above the London interbank offered rate.

They added that final pricing had not been determined and could still change but said an interest rate in that range for an investment grade company such as Verizon would provide an attractive return for the banks participating in the loan.

The completion of the syndicated loan will dispel some fears that the tough markets would force Verizon Wireless to renege on the Alltel deal and pay a $500m break-up fee. The deal was cleared by the US Federal Communications Commission last month while the Federal Trade Commission, the antitrust regulator approved it yesterday.

People close to the situation said Morgan Stanley, Citi and Bank of America had agreed to commit more than $2.25bn each. Bank of Tokyo-Mitsubishi, part of the Japanese financial giant that recently bought a 21 per cent stake in Morgan Stanley, had also agreed to commit a similar amount, they added.

The banks’ final exposures are expected to be lower than their original commitments as the loan was parcelled out to other institutions.

Copyright The Financial Times Limited 2008