In what may prove to be the largest sale of bonds ever by a U.S. firm, WorldCom has upped the ante on a global offering it plans on pricing May 9.
The deal, which had been originally forecast at $7 billion to $8 billion, is now expected to tip the scales at a whopping $12.2 billion, or more than 74 percent over the low range of the original estimate.
Traders close to the deal reportedly have received as much as $20 billion, or nearly twice the expanded size, in investor offers for the debt, which is rated A3 by Moody’s Investors Service and BBB+ by Standard & Poor’s.
In the meantime, the large demand for the debt has enabled the issuer to offer narrower spreads than those forecast one or two days ago.
In the U.S. dollar portion of the deal, the company will sell $1 billion to $2 billion of three-year notes at +215/+220 basis points over Treasurys (from +225/+230), $3 billion to $4 billion of 10-year notes at 245 to 250 basis points over (from +250/+255), and $3 billion to $4 billion of 30-year bonds at +265/+270 (from +270/+275 bp).
At current rates, this would put the yield on the 10-year segment, for example, at 7.66 percent to 7.71 percent.
Despite this, market sources still say that the deal is being priced to sell quickly
By way of comparison, a 10-year issue priced in January by Baa1/BBB+ – rated Sprint Capital Corp. to give 261 basis points over Treasurys, some 10-15 basis points wider than the 10-year segment of the WorldCom offering.
The Sprint issue was most recently indicated at 223 basis points over Treasurys, or about 7.44 percent, making them about 25 basis points lower yielding, and therefore more expensive for investors to purchase, than the WorldCom bonds.
“This is creating a feeding frenzy for the paper,” said one market source.
Reports indicate that the Clinton, Miss.-based firm will be using the money to refinance $3.1 billion of debt coming due in November, pay down as much as $6 billion of commercial paper, as well as for possible expansion or acquisitions.
The deal is being led by J.P. Morgan Chase and Salomon Smith Barney.
The last major bond offering to come out of the telecommunications sector was France Telecom, which in March sold $16.4 billion in several currencies, breaking the record for the largest international sale.