(Bloomberg) — T-Mobile US Inc. sold its first bond backed by customer phone loans, a move that helps diversify its funding sources as the company acquires rival Sprint Corp. in 2020.
Most read from Bloomberg
The telecommunications giant was valued at 842 million on Tuesday. sale price of US dollar asset-backed securities. It spent 750 million to investors. USD 90 basis points above the US Treasuries interpolated curve and the remainder was not offered.
The wireless carrier is going after rival Verizon Communications Inc. in the bond sale. created road, which in 2016 began issuing similar securities backed by facility payment plans. Until now, Verizon’s ABS bonds have covered the entire market for such securities. according to data compiled by Bloomberg News.
The telephone plan-backed bond market hit a record high this year. So far, the issue amounts to 3.7 billion. excluding T-Mobile sales, compared to $4.4 billion. USD throughout 2020 The release of T-Mobile would add about $4.5 billion in revenue.
“Verizon has been able to expand the maturity of this sector and it’s been stable over time, and I think that’s really helped develop this niche ABS sector to be a little bit more open to investors,” said Ian Rasmussen, managing director of wealth. interview Fitch Ratings Guaranteed Securities.
Fitch and Moody’s Investors Service rate the T-Mobile deal and expect the bulk to give it a AAA rating. The bond sale was led by RBC Capital Markets along with Barclays Plc and Mitsubishi UFJ Financial Group.
The money raised will help T-Mobile diversify its sources of funding after taking on significant debt to pay for its 2020 plans. in April The acquisition of Sprint and the acquisition of spectrum rights. Spectrum is very important in the development of wireless networks.
Representatives for T-Mobile and the banks arranging the deal declined to comment.
T-Mobile has been on a hot streak lately. The number of subscribers is growing even after the acquisition of Sprint established itself among the top three mobile carriers in the US. Its stock price fell even as rivals Verizon and AT&T Inc. struggles and helped the company become a favorite of hedge funds.
In addition, S&P Global Ratings recently gave the company an investment grade rating, while Moody’s gave it a blue chip rating earlier this summer. Fitch also rates the company BBB-.
AT&T said in July that more of its customers are behind on their bills, putting the telecom company at risk as economic growth slows. If T-Mobile faces pressure on earnings and a possible downgrade of its corporate credit ratings, this securitization could be hurt, Fitch said in a Sept. 27 note. in the preliminary report that dealt with the transaction.
The deposit seems safe for now. The loan, or “Equipment Installment Plan Sales Agreement,” backing the securitization is backed by T-Mobile and has an average FICO score of 706, the report said.
Despite the looming risk of a recession and the fact that households can no longer count on the support of government stimulus payments, consumer finances are still in relatively good shape. Even if households start to run out of cash, it will likely take a long time for them to stop paying with their phones, analysts said.
“Paying your phone plan has become a priority over the years, and the pandemic has pushed that even further,” Rasmussen said.
(Updates to show transaction price.)
Most read from Bloomberg Businessweek
© 2022 Bloomberg LP