AT&T saw some of its shorter-term outstanding bonds widen sharply in secondary trade Monday after the telecoms giant announced a blockbuster US$85bn acquisition of Time Warner.
AT&T’s 2.8% 2021s were spotted at T+120bp, some 15bp wider than Friday’s close, according to one trading source, while its 4.125% 2026s were spotted at T+170bp or 7bp wider on the day.
Meanwhile Time Warner’s 2.95% 2026 were bid 17bp wider at T+140bp after the announcement of the deal, which still needs the approval of US regulators.
At the longer end of the curve, the trader said, AT&T’s 4.8% 2044s narrowed 2bp to T+228bp.
Analysts at CreditSights said Monday they calculated net leverage of the combined company to be around 3x, comparing to current net leverage of 2.3x at AT&T and 2.7% at Time Warner.
Chris Ucko, global head of research at CreditSights, said they expected AT&T bonds to see “substantial volatility” in trading Monday.
The acquisition is being backed by a US$40bn 18-month unsecured bridge loan, TRLPC reported.
JP Morgan and Bank of America Merrill Lynch are joint lead arrangers and bookrunners of the loan.