AT&T Plans Bond Offering

Telecom raises funds to help pay $3.25 bln of debt that matures this year.

     AT&T Inc., the second-largest U.S. wireless carrier, is planning to sell bonds in a benchmark offering to help pay back some of the $3.25 billion of outstanding debt that comes due this year.

     AT&T may issue five-, 10- and 30-year debentures as soon as today, according to a person familiar with the offering. Proceeds may be used for general corporate purposes as well as repayment of its outstanding bonds, said the person, who declined to be identified because terms aren’t set. Benchmark offerings are typically at least $500 million.

     Corporate bond offerings are showing signs of life, with borrowers from Occidental Petroleum Corp. to San Diego Gas & Electric Co. joining Dallas-based AT&T in tapping the market as yields on investment-grade debt hover at about the lowest on record. Sales rose 43 percent last week to $12.1 billion after falling to the lowest since June during the period ended Aug. 5, according to data compiled by Bloomberg.

     Barclays Plc and JPMorgan Chase & Co. are managing AT&T’s offering, the person said. The company is rated A2 by Moody’s Investors Service and A-, one step lower, by Standard & Poor’s.

     AT&T last sold bonds on April 26, when it issued $1.75 billion of five-year, 2.95 percent notes that yielded 97 basis points more than similar-maturity Treasuries and $1.25 billion of 10-year, 4.45 percent debt that paid a spread of 115 basis points, Bloomberg data show. A basis point is 0.01 percentage point.

     The notes due May 2016 traded at 104.4 cents on the dollar on Aug. 12 to yield 1.98 percent, 102 basis points more than benchmarks, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority.

     Yields on bonds in the Bank of America Merrill Lynch U.S. Corporate Master Index averaged 3.64 percent on Aug. 12 after touching 3.503 percent on Aug. 9, the lowest in daily data extending to October 1986.

Bloomberg News
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