Vodafone snubs investor demands, pulls bond instead
By Davide Scigliuzzo
NEW YORK, Nov 25 (IFR) - Vodafone fell victim to the picky corporate bond market this week, opting to pull its deal rather than relent to investor demands for chunkier spreads and greater risk protection.
The investment-grade deal, expected to be up to US$2bn in size, was the second multi-billion dollar issue yanked from the market in a week - and largely for the same reasons.
The sticking point appeared to be the absence of a change-of-control (CoC) provision - a covenant that forces issuers to redeem bonds, usually at 101, in the event of a takeover or merger, and which helps limit bondholder losses.
Bookrunners Citigroup, Goldman Sachs, JP Morgan, Mizuho and Morgan Stanley began marketing the 30-year issue at Treasuries plus 250bp area - but it struggled to gain traction.
Investors decided the event risk was too big to ignore - especially as Vodafone's talks with junk-rated Liberty Global fell apart less than two months ago - and asked for a CoC clause as well, a senior banker on the deal told IFR.
But Vodafone declined, the banker said, instead trying to sweeten the terms by offering coupon step-ups in the event of a downgrade to junk from Moody's or S&P.
One investor said the coupon would have increased by 25bp per notch of downgrade per agency, with a 200bp cap.
In the end, the two sides could not agree and after investors began asking for more spread - roughly up to 100bp more - Vodafone decided enough was enough. Continuación...