Goldman favours BT step-up bond

In its latest Credit Line research report, Goldman Sachs adds BT Group’s 8.625% 2030 bonds to its list of “picks”. The firm favours these bonds in place of the 5.95% 2018 notes that were previously on its pick list. It says 25 basis point coupon step-up in the longer dated bonds provide better downside protection if the telco’s ratings continue to decline. Goldman’s analysts also think that the bond is a good candidate for a debt exchange or early tender offer. Following Standard & Poor’s  downgrade of BT to BBB-, the coupon on the 2030 bonds is now due to step up to 9.875% in June, making it a costly bond for the company to keep outstanding.