Telefónica places 1.5 billion in senior debt and hybrid bonds

Telefónica has made two debt issues for a total value of 1.5 billion euros on Monday, as it has placed 1 billion euros in a 10-year senior bond issue and another 500 million in a perpetual 'green' hybrid bond, according to The company has informed that it has also launched a repurchase offer for outstanding hybrid bonds from two previous issues.

Specifically, as reported by the company in a statement sent to the National Securities Market Commission (CNMV), Telefónica has placed 1 billion euros in senior bonds due on February 3, 2030, with a demand exceeding 2,500 million euros, which has allowed to increase the initial amount of 750 million to 1,000 million.

The coupon for this placement, made through its subsidiary Telefónica Emisiones, has been set at MidSwap plus 68 basis points, which represents an interest of 0.644%, below the initial MidSwap coupon plus 90 basis points, and the coupon plus low paid by the company for an issuance of such long terms.

On the other hand, Telefónica Europe, its Dutch subsidiary, has executed a new issuance of green hybrids amounting to 500 million euros with no expiration date – but with a first rescue date set for May 2027 -, being the first Green hybrid bond of the telecommunications sector worldwide.

Record coupon

The yield of the bond has been set at 2.502% per year, compared to the initial range of between 2.75% and 2.875%, which is the lowest hybrid coupon in the history of Telefónica, while demand has exceeded 2,000 million euros, more than four times above the offer.

As of May 2027 (inclusive), the obligations will accrue a fixed interest equal to the applicable seven-year Swap rate, plus an annual margin of 2,663% from this day until February 5, 2030 (not included); 2,913% per annum from February 5, 2030 to May 5, 2047 (not included); and of 3,663% annual since May 5, 2047 (inclusive).

The funds obtained will be used to finance projects aimed at increasing the company's energy efficiency, through the process of transforming copper into fiber optics, which is 85% more energy efficient, and boosting the self-generation of renewable energy.

Reduce the CO2 footprint

The company argues that these objectives contribute to Telefónica's decarbonization strategy and its new objectives, aligned with the highest degree of ambition to help limit the global temperature rise to 1.5 degrees.

Telefónica has already allocated the funds of the company's first 'green' bond, issued in January 2019, to this fiber migration process. According to the annual bonus monitoring report, the initiative has helped reduce the carbon footprint by 36,045 tons of carbon dioxide (CO2) in the year, equivalent to the carbon captured by 596,000 trees.

In the 2016-2019 period, with the shutdown of hundreds of thousands of elements and the closing of hundreds of copper plants, Telefónica saved 346 gigawatt hours (GWh) of energy with 93,297 tons of CO2 avoided, corresponding to carbon captured by more than 1,543,000 trees.

The banks that have participated in these debt issuance operations have been IMI Banking, Crédit Agricole, Commerzbank, Deutsche Bank, HSBC, MUFG, SMBC Nikko, Socété Générale and Unicredit.

Hybrid Buyback

On the other hand, Telefónica announced this morning the launch of an offer to repurchase the hybrid bonds that were in circulation of two issues valued at a total of 1,340 million euros, one of 600 million pounds sterling (714.2 million euros) and another of 625 million euros.

Specifically, Telefónica offers holders the repurchase of hybrid bonds whose total amount amounts to 496.4 million euros. Specifically, 171.5 million pounds sterling (203.7 million euros), 28.58% of the original aggregate nominal amount, and of the second, 292.7 million euros, remain outstanding for the first issue. 46.83% of the total.

Regarding the repurchase price, the price to be paid for every 100,000 pounds sterling or 100,000 euros of the nominal amount of the bonds will be £ 104,571 for every 100,000 pounds for the first and 112,313 euros for every 100,000 euros for the second.

The objective of the offers, which will begin on Monday and end on February 3, is, among others, proactively manage the issuer's hybrid capital base (Telefónica Europe). In addition, the offers give bondholders the opportunity to replace their bonds with new ones before the arrival of the first amortization dates.

Since June 2016, the company has reduced the volume of its net debt by about 15,000 million euros, maintaining an active financing policy, with the objective of extending terms and reducing costs, taking advantage of the environment of interest rates and margins of low credit.