Vodafone and Three to merge

[Jake Rickman]

This thread is for the general discussion of the Article Vodafone and Three to merge. Please add to the discussion here.

 

[BuddingLawyer]

Thank you Jake. Rookie question : does issuance of 6 billion pound debt means both companies will issue either new bonds OR will take a new loan ?

Thanks

 

[Jake Rickman]

Thank you Jake. Rookie question : does issuance of 6 billion pound debt means both companies will issue either new bonds OR will take a new loan ?

Thanks

Hey there, it depends on the market. In this case, I am not sure it is entirely disclosed, though if I had to surmise a guess, it would probably be secured bank loans. But this is a guess based on the industry. Telecoms companies can offer raise debt through bank loans because they have lots of (a) real assets (land, telecommunications towers, etc) and (b) stable cash flow through long-term contracts and relatively low rates of competition and threats of entry. This means that (a) banks know there are lots of assets to take security over; and (b) they know the company can service the interest payments. This means telecoms can get loans with competitive interest rates.