| Telefónica’s 51/8, Feb 2013 |
| Source: Bloomberg |
A new-issue premium is always expected on a jumbo transaction but no one expected Spanish telecom Telefónica to run into quite as many difficulties on the first part of its refinancing of the £18.5 billion ($33 billion) purchase of UK mobile provider O2. In particular, ABN Amro, Barclays Capital, Société Générale and BBVA found the going rather tough on the euro tranches of Telefónica’s benchmark trade. Investors, having lost confidence, sat on their hands until spread guidance widened substantially. Barclays, BNP Paribas and Royal Bank of Scotland had a slightly easier time of it on the sterling-denominated tranches but there too the deal had to be widened in sympathy with the euro bonds.
Bad recipe
There is no definitive recipe for success on any bond new issue. However, following an extensive three-day roadshow it should be possible to gauge accurately the level of investor interest. Unfortunately this was not the case.
Telefónica’s senior management had stated last year that the company was committed to its single A rating and would not be buying O2.