It seems appropriate that the financing of Verizon Communications’ buyout of Vodafone Group Plc from its mobile network joint venture would break so many records: The figures involved were so large they could easily be mistaken for phone numbers.
The $130 billion M&A deal, which saw Verizon acquire Vodafone’s 45 percent stake in Verizon Wireless, was backed by a $61 billion bridge loan—the largest bank financing in history. The loan was itself refinanced with a permanent capital structure including a $49 billion issuance of corporate bonds, which also made it the largest bond offering ever.
“People might say it’s just like any other transaction, only bigger, but it’s really not,” says Steven Slut­zky, a corporate partner in the New York office of Debevoise & Plimpton, which acted for Verizon on the bond deal. (Davis Polk & Wardwell corporate partner Jason Kyrwood advised the banks on the bridge financing.)
“Try to imagine the amount of paper it requires to close a transaction that involves $50 billion,” Slutzky adds. “The Depository Trust & Clearing Corporation [the main provider of clearing and settlement services to the U.S. financial markets] only allows you to have notes that represent an aggregate principal amount of $500 million. That means we had to prepare, review and sign off on over 100 individual notes.”
But it wasn’t just the size of the deal that made it a handful (and in the case of the paperwork, an entire roomful). Slutzky and his team were working under severe time constraints, too.
The bond offering was scheduled to be announced simultaneously with the M&A transaction on the last day of the Labor Day weekend, leaving Debevoise less than three weeks to put the colossal deal together from start to finish, including the filing of a new shelf registration statement with the Securities and Exchange Commission. And because Verizon had historically tended to handle the lawyering on debt offerings in-house, Slutzky had to devise a new due diligence plan from scratch, most of which was conducted through round-the-clock efforts by more than a dozen lawyers in Debevoise’s capital markets, tax, regulatory, employee benefits, intellectual property and litigation practices over a single week. Verizon also faced pushback from the banks over its issuer-favorable securities documents, resulting in intense negotiations between the company and underwriters.
“The last two weeks in August are traditionally slow periods, as people are on vacation, but we had to do a full due diligence on one of the world’s largest companies and get everything together so we could launch the largest bond offering ever,” Slutzky says.
The matter was complicated by a desire for secrecy—so as to not affect Verizon’s share price ahead of the M&A deal—meaning that several key individuals at the company and banks were not informed of the bond offering until four days before the due diligence process needed to be completed. Even many of those who did know had their hands full with work on the M&A transaction.
“A lot of people we’d normally have to work with on a deal like this weren’t aware of what was happening and couldn’t be made aware,” Slutzky says. “We also had to contend with the fact that the lawyers at Verizon were in the middle of this huge M&A transaction, and that was their primary focus.”
Slutzky’s efforts did not go unnoticed. David Kauffman, vice president and associate general counsel at Verizon, says that Slutzky was “invaluable” in steering the bond offering to completion.
“We really value Steve’s judgment,” Kauffman says. “If he tells us that he thinks it’s okay to do something, we’re pretty confident that’s the case. Our securities work is done by a fairly small group for such a large company, so accessibility is also really important to us. People joke that if I don’t answer my BlackBerry within five minutes, they think I’ve died. Well, I’ve talked to Steve when he’s at the top of a ski slope [and] at one of his son’s birthday parties … he always makes himself available.”