Investors embrace AT&T’s $10 billion bond sale

The dollar portion of AT&T’s large $10.1 billion bond sale is expected to price today after the company doubled the size of the offering due to strong demand. The European portion priced favorably this morning, as AT&T sold a 2 billion euro, five-year, fixed-rate bond at a yield of 225 basis points over benchmark government bonds. Original estimates were for the notes to sell at a yield of 200 basis points over government bonds.

The entire multi-tranche deal, originally set for the $5 billion range, consists of $1.5 billion in five-year notes, $2.75 billion in 10-year notes, and $2.75 billion in 30-year bonds. The notes are expected to price between 2.60 percentage points and 3.00 percentage points over Treasuries.

The strong demand exists despite October rate cuts imposed on AT&T by Moody’s Investors Service and Standard & Poor’s. The agencies downgraded AT&T’s long-term debt and commercial paper.

AT&T plans to use the proceeds from the bond sale to refinance existing debt. AT&T Chairman and CEO Michael Armstrong said the company has reduced its year-end 2000 debt load of $56.2 billion to $36.5 billion and is negotiating deals to monetize some of its non-core holdings.

--Vincent Ryan, senior editor