France Telecom’s Bond Sale Raises US $16.4 Billion

[London, ENGLAND] Investors, unable to resist yields
as high as 8.5 percent, purchased US $16.4 billion of
France Telecom’s debt in a bond sale that broke all
records this week.

Originally, France Telecom had planned for between
US $7 billion and US $8 billion, but with demand so
high the French telco was able to double the amount.
In the event, investors on both sides of the
Atlantic bid US $32 billion for the bonds, nearly
two-thirds coming from the United States.

Jean-Louis Vinciguerra, executive vice president of
France Telecom, said his company was very happy with
the success of the operation which demonstrated the
high credit standing of France Telecom.

“This loan is, moreover, extremely beneficial for the
group because it enables us to spread out our debt over
a longer period,” said Vinciguerra.

Like BT and Deutsche Telekom, France Telecom incurred
massive debt by purchasing third generation mobile
licenses in preparation for running mobile Internet
services. Its bond sale actually topped the figure
of US $14.6 billion achieved last June by Deutsche
Telekom in a similar debt restructuring move.

According to analysts, the price of France Telecom’s
bonds should rise quickly in coming weeks, especially
as yields were almost at junk bond levels while the telco
still enjoys investment-grade credit ratings, despite
recent problems.

Seven different tranches were offered in the bond
sale, four of them denominated in U.S. dollars, two
in euros, and one in pounds sterling.

While many of the dollar-denominated bonds are five-
and ten-year notes offering a slightly lower rate,
30-year bonds worth US $2.5 billion were sold —
and they carry a yield of 8.5 percent, 3.08 percentage
points more than U.S. Treasuries.

This week’s bond sale is the first time that France
Telecom has accessed the American bond market with
such a huge transaction.

It remains to be seen whether the new investors will
stick with the bonds or “flip” them for short-term

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