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AT&T prices $8B offering
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March 23, 1999: 3:42 p.m. ET
Record bond sale to finance debt from TCI purchase, stock buyback
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NEW YORK (CNNfn) - AT&T Corp. Tuesday priced its $8 billion global bond offering, the largest ever and easily surpassing the previous record $6.1 billion bond offering by Worldcom Inc. last August.
Due to high demand, the size of the AT&T (T) offering was increased from $7 billion. Proceeds will be used to finance the company's $4 billion share buyback program and short-term debt incurred in its $55 billion purchase of cable company Tele-Communications Inc.
The telecommunications carrier said the offering will consist of three parts:
An issue of $2 billion in five-year notes with a coupon rate of 5.625 percent will be offered at a discount -- 99.532 per $100 face value -- to yield 5.735 percent, or 64 basis points more than the five-year U.S. Treasury note.
A $3 billion issue of 10-year notes with a 6 percent coupon will be sold at 99.765 percent of face value for a yield of 6.032 percent, or 84 basis points more than the U.S. 10-year note.
And $3 billion of 30-year bonds yielding 6.5 percent will be sold at 98.936 percent for a yield 6.582 percent, or 94 basis points more than the 30-year U.S. Treasury bond.
Merrill Lynch and Salomon Smith Barney are the lead underwriters for the A1/AA-minus rated issue, which nearly fulfills AT&T's stated intention to borrow a total of $10 billion in the debt market this year. The eight other underwriters include First Chicago Capital Markets, J.P. Morgan and Lehman Brothers.
Is it a good thing?
Interest in the AT&T issue was especially high because "there has not been a lot of telecom paper, like last year. There is a lot of cash out there," one investor said.
Robert Schiffman, a fixed income analyst with Donaldson, Lufkin & Jenrette, told CNNfn it didn't make sense for AT&T to wait any longer, since the cost of capital is cheap right now and Treasurys are strong.
Brad Stone, chief investment officer for fixed income of American Express Asset Management Group, said, "I like the 10-year especially. It's going to be a big, liquid issue. Global bonds have a lot of liquidity. AT&T is also a well known household name."
AT&T hasn't tapped the debt market since 1995. Some observers worried its return may be inspiring a flock of copycat deals that could flood the market with an excess supply of bonds.
"I am a little concerned that we may have become over-hyped," said one analyst who asked not to be identified. "The technicals for this deal were good, but the question is, what comes next?"
AT&T is a very strong credit with strong cash flow but not a lot of upside potential on credit improvement, the analyst said.
John Burgess, chief fixed income strategist at Bankers Trust Global Investment Management, said the issue "was not a blockbuster blowout but it went fine. Clearly there was good demand for it so it came and went as expected."
By late afternoon, shares in AT&T were trading up 7/8 at 78-5/8. The 30-year Treasury was up 2/32 for a yield of 5.56 percent. 
-- from staff and wire reports
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