News
Spanish incumbent raises fresh capital in wake of failed Telxius IPO.
Following the failed IPO of its infrastructure unit Telxius, Telefonica this week issued new bonds totalling €2 billion.
Split into two tranches, the first amounts to €1.25 billion and is due on 17 October 2020, paying an annual coupon rate of 0.318%. The second tranche comes to €750 million and is due on 17 October 2031, and pays an annual coupon rate of 1.93%.
The bond issue comes not long after Telefonica scrapped the launch of an initial public offering of Telxius, a wholly-owned subsidiary that manages and monetises the Spanish incumbent’s network assets.
Telefonica aimed to raise around €1.5 billion from the flotation, which would have helped pay off a chunk of its hefty net debt, but the indicative offers failed to meet its expectations, so the plan was abandoned.
Despite the setback, there are positives to take from this week’s bond issue.
"The very low levels of the coupon in both issuances demonstrates that despite Telefonica’s high leverage, the company can refinance easily at very attractive levels," said Haitong Research, in an investor note.
This is in part due to low interest rates, the brokerage said, "which we believe somewhat offsets the negative impact from the [Telefonica] group’s indebtedness."
