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The Deal: In Record Verizon $49B Notes Deal, Timing Was All

Tickers in this article: AAPL VOD VZ

NEW YORK (The Deal) -- The bad news for Verizon Communications is that it just paid higher borrowing costs on a record-breaking $49 billion bond offering backing its $130 billion acquisition of Vodafone's stake of Verizon Wireless than it would have at the start of the year.

The good news is that it isn't paying more. Plus, investors couldn't have been happier.

Locking in rates on almost $50 billion after 10-year Treasury yields have almost doubled to just under 3% can only be viewed as a good thing even if the company would have cut its borrowing costs substantially if it had been able to complete the deal for Verizon Wireless earlier this year.

"It was successful in the sense they were able to get the largest bond deal of all time done," said Gimme Credit LLC analyst Dave Novosel. "Having said that there was a cost to achieve that. The new issue premiums were very high."

"In that sense the investors who got in on this deal will be successful as well," he added.

Verizon inked the record-setting deal previously held by Apple , which issued $17 billion of bonds in April to back its $100 billion stock buyback plan.

Of course, Apple chose to do its offering because the cheap debt helped defray some of the tax consequences of tapping more of its $145 billion cash cushion to fund its capital return program.

Plus, there is that pesky timing issue. At the point at which Apple went out to the market, bond yields were still close to historic lows.

For instance, Apple's 10-year notes had a coupon of 2.4% versus the 5.15% coupon that Verizon just printed. Apple's spread to the Treasury yield was 75 basis points as opposed to Verizon's spread of 225 bps for the notes.

Yet, the premium Verizon was willing to pay lured investors in a big way. Orders poured into the offering, sending the book to approximately $101 billion, according to IFR Markets. The company saw so much interest in the United States that it was able to postpone a European notes offering, perhaps permanently.