UPDATE: Verizon Comm Bond Deal May Land Around $4.5 Billion -Source

Verizon Communications Inc. (VZ) is in the market to sell around $4.5 billion in new debt Wednesday, according to a person familiar with the transaction.

The deal is split five ways: a three-year fixed-rate piece; a three-year floating-rate piece; a five-year fixed tranche; a 10-year fixed tranche and a 30-year fixed tranche. "It's all across the curve and it's going to be demand-driven," the person familiar said.

Earlier in the day, sources said the telecommunications giant intended to sell as much as $1 billion across each of the fixed-rate tranches. The floating-rate tranche is now shaping up to be at least $500 million, they added. The ultimate sizing of the transaction has not yet been set.

Price guidance on the three-year floaters is the equivalent of the three-year fixed rate--making the rate as of lunchtime Wednesday around 0.61 to 0.66 percentage points over the three-month London interbank offered rate, or Libor.

Meanwhile, price talk on the three-year fixed piece is 0.85 to 0.90 percentage points over comparable Treasurys; in the area of 1.05 percentage points over Treasurys for the five-year piece; 1.35 percentage points over Treasurys for the 10-year tranche; and 1.65 to 1.70 percentage points over for the 30-year debt.

Multi-tranche deals have become popular among issuers of late. French drug maker Sanofi-Aventis SA (SNY) sold $7 billion of bonds across six tranches Tuesday, including one- and two-year debt, to help fund its acquisition of Genzyme Corp. (GENZ).

Leading the sale of Verizon's new three-year floaters is Goldman Sachs. The three-year fixed-rate piece is being led by Goldman, Citigroup, J.P. Morgan Chase & Co., Morgan Stanley and Wells Fargo, while the remaining five-, 10- and 30-year tranches are being led by Citi, J.P. Morgan, Morgan Stanley and Wells.

Bank of America Merrill Lynch, Barclays Capital and Royal Bank of Scotland have supporting roles on the transaction.

Verizon is expected to use the proceeds to pay down commercial paper debt and for general corporate purposes. As of March 22, the company had $3.7 billion of commercial paper outstanding, bearing interest at an average rate of 0.40%.

At the end of 2010, the company had $45.3 billion of long-term debt and $7.5 billion in debt maturing within one year, a spokesman said. It also had $2 billion in cash on its balance sheet, bringing its net debt to around $51 billion.

Separately, the company said in January it is acquiring an information technology and cloud computing specialist called Terremark Worldwide Inc. (TMRK) for $1.4 billion. That deal is set to close this quarter.

The new bonds are expected to be rated A3 by Moody's Investors Service, A- by Standard & Poor's and A by Fitch Ratings.

-By Katy Burne, Dow Jones Newswires; 212-416-3084; katy.burne@dowjones.com

Terremark Worldwide, Inc. (MM) (NASDAQ:TMRK)
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