Telecom Italia has successfully placed a billion euro seven-year bond. It was the first issue since Moody's and S&P cut the telephone group's rating to junk level between October and November 2013.
Orders exceeded 7 billion and, according to what was reported by the lead managers of the transaction, the bond - maturing in January 2021 and with a 4,5% coupon - was priced at a reoffer of 99,447, for a final yield of 4,594%, corresponding to a spread 300 basis points above the midswap rate.
Furthermore, despite the "junk" rating, a note from the company communicates that the loan took place below the average cost of Telecom Italia's debt.
The bond was placed at more favorable conditions for the company than the bond of the same maturity launched by Telecom Italia less than six months ago, before the downgrades, when corporate ratings were still in the "investment grade" area. Which is possible, as one of the deal's dealers explained, in the light of investors' current appetite for returns, in a market context of low interest rates.
The last Telecom bond, the 7 billion euro 1-year bond dated September 2013, was priced at 330 basis points above the midswap rate.
