T-Mobile US Inc. is tapping the US investment-grade bond market on Monday as blue-chip firms rush to raise fresh capital ahead of key inflation data later this week.
The US wireless carrier is selling $2 billion of debt in two parts, according to a person with knowledge of the matter. The longest portion of the offering, a 30-year security, is expected to yield about 1.63 percentage points above Treasuries, said the person, who asked not to be identified as the details are private.
Proceeds from the offering will be used for general corporate purposes, which may include share buybacks, dividends and refinancing of existing debt, said the person.
The carrier has $6.8 billion of cash and may produce $7 billion to $8 billion of free cash flow in the second half of the year, according to Bloomberg Intelligence analyst Stephen Flynn. Still, the wireless behemoth may sell bonds to address large obligations, including debt maturities, spectrum purchases, share buybacks and a newly established dividend.
“It’s prudent for the company to bolster liquidity,” Flynn wrote in a note on Monday.
T-Mobile declined to comment.
The company’s shares rose 1% to $139.10 at 9:50 a.m. in New York. The stock is up 10% from a low in May and is up nearly 4% from last week, when the company announced a new $19 billion share buyback authorization and the creation of its first quarterly dividend.
The firm, which attained its blue-chip status last year, is taking advantage of robust demand for long-dated bonds as bets of a soft landing in the US and hopes that central banks will soon be able to slow their tightening campaigns increase.
High-grade borrowers raised $55.5 billion last week, the third-largest weekly tally this year, with supply heavily skewed to debt due in under 10 years.
Read more in our Credit Weekly: Companies Bet Against High For Long in Bond Blitz
The firm is among around thirteen potential issuers looking to tap the high-grade market on Monday. Investment-grade borrowers are expected to raise $30 billion this week, with issuance anticipated to be front-loaded ahead of a crucial reading on US consumer price index report on Wednesday.
Citigroup Inc., Morgan Stanley, RBC Capital Markets and Wells Fargo & Co. are managing the bond sale, the person said.
(Updates headline and second paragraph with deal size.)
Author: Caleb Mutua, Brian Smith and Scott Moritz
