Verizon sets pricing for cash tender offers tied to debt consents, extending deadlines for early participation

Verizon Communications (NYSE: VZ) said on June 2 that it has set the pricing terms for previously announced cash tender offers and related consent solicitations covering 20 series of debt securities issued by Verizon and certain wholly owned subsidiaries. The offers are designed to reduce outstanding debt while also seeking changes to indenture terms - steps commonly used in “liability management” exercises when companies want to adjust covenants or other provisions embedded in bond contracts.

In the announcement, Verizon said withdrawal rights for each tender offer ended at 5:00 p.m. New York City time on June 1. For the “any and all” portion of the program - offers where holders can tender their full holdings in specified series - Verizon extended an early participation window to 5:00 p.m. on June 16, when the tender offers also expire unless Verizon extends or terminates them. Verizon also referenced a June 2 “price determination date,” when the company’s pricing calculations were set.

Verizon’s release included per-series pricing tables showing the offer yield and the total consideration payable for each $1,000 principal amount tendered at or before the June 1 early participation cutoff. The company described the calculation as a sum of (1) the bid-side yield of a specified benchmark U.S. Treasury security (as quoted on June 2) and (2) a fixed spread in basis points for each note series. For example, Verizon listed a 6.860% debenture due 2028 (Frontier Florida LLC) with an offer yield of 4.191% and total consideration of $1,041.04 per $1,000 principal tendered, and a 6.730% debenture due 2028 (Frontier North Inc.) with offer yield of 4.191% and total consideration of $1,039.94.

The June 2 pricing update tied the tender offers to consent solicitations seeking amendments to the indentures governing the notes. Verizon’s earlier tender-offer announcement explained that if a holder tenders any and all notes in the relevant offer, the holder is also deemed to deliver its consent for the applicable principal amount to proposed indenture amendments. Verizon also clarified in the pricing release that, for the cash tender offers, the total consideration does not include accrued coupon payments; those accrued coupons would be paid separately in cash on the settlement date. Verizon further stated that there is no separate consent payment for the consent solicitations connected to the cash tender offers - distinguishing this structure from the company’s separate exchange-offer program described elsewhere.

A central feature of the cash tender program is a “waterfall” mechanism for a subset of notes, where acceptance is ordered by an “acceptance priority level.” Verizon said the acceptance of waterfall notes is subject to a cap on the total cash paid for those notes, excluding accrued coupon payments. The company also noted that because the total consideration for waterfall notes tendered by the early participation date would equal the increased waterfall cap, no waterfall notes tendered after that early participation deadline would be accepted for purchase.

The tender offers and consent solicitations follow Verizon’s May 11 launch of the same framework, including offers to purchase for cash (i) any and all of certain notes and (ii) up to a defined aggregate amount of other notes using the waterfall methodology. Verizon’s May 11 release said the consents are intended, among other things, to eliminate restrictive covenants and other provisions in existing indentures - changes that can make future refinancing or capital-market activity easier, or can align bond terms with current corporate strategy.

What Verizon did not provide in the June 2 pricing update was a final view of how much it will actually buy in aggregate across all series, or the ultimate total cash outlay once acceptance priorities and the waterfall cap are applied. Investors will likely focus next on the offer results - how many notes are tendered and accepted in each series - along with the settlement timing once the June 16 expiration approaches.