New issues: Telefonica launches refinancing deal

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Telefónica kicked off the January sales in the corporate bond markets on Wednesday, launching plans to issue about €5.5bn worth of bonds to refinance bank debt related to the Spanish telecoms operator’s acquisition of O2 of the UK.

Telefónica plans to issue €4bn worth of bonds with maturities of five and 10 years and £1bn of notes with expected maturities of at least 12 and 20 years, according to one banking source.

The issue will be one of the biggest in the European corporate bond markets in the past few years.

Low funding requirements meant the average deal size shrank and new corporate issue volumes fell 13 per cent to €87bn last year, according to SG CIB.

Refinancings of a number of large acquisitions will boost supply this year, but many expect overall volumes to remain low.

Proceeds from the new bond issues will go to refinance part of the $18.5bn Telefónica borrowed in the bank loan market last year to buy its UK peer in an all-cash deal worth £17.7bn.

ABN Amro, Barclays Capital, BBVA and SG CIB are lead-managing the euro tranches while Barclays Capital, BNP Paribas and RBS are leading the sterling deal.

It meant Citigroup and Goldman Sachs, which put together the initial debt package with RBS, missed out on the bond mandates.

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