EFTA01378322

INTERNAL USE ONLY DO NOT DISTRIBUTE IN PART OR IN WHOLE Corporate Credit > U.S. Investment Grade Verizon Communications Inc. (VZ) Updated: Nov. 1, 2015 Trade Idea: 0 Buy Verizon intermediate dated bonds. Investment Rationale: As investors search for yield, Verizon spreads continue to look cheap versus the IG Index and TMT peers. We believe that there may be some room to run in 2015 after expected heavy issuance from AT&T and Verizon. 0 VZ increased leverage to the Upper-2x area in 2013 to buy the remaining 45% of Verizon Wireless that it did not own. The company suffered modest downgrades as a result. We viewed the deal favorably. We believe that VZ has the ability and willingness to regain Low-Single A ratings over the intermediate term. ► While competitive intensity will likely increase in the U.S. wireless industry, VZ should continue to maintain its dominant position due to its strong wireless network and spectrum position. VZ has close to 100 million retail postpaid connections. Additional diversity comes through its FiOS video/broadband offering and enterprise strategic services. Legacy wireline revenues continue to shrink as a percent of total revenues. VZ should continue to generate solid FCF over the intermediate term. Recommendation(s): Trade Ratings Issue Spread Cash View Horizon Ticker CPN Maturity CCY Size Yield Price ISIN S&P Moody s Entr Target Loss Outperform 3/6/12 VZ 350 11/112024 BBB Baal USO 2.500 3.50 142 125 185 $103 0 US92343 VCR33 Deutsche Asset & Wealth Management 23 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) CONFIDENTIAL DB-SDNY-0075491 SDNY_GM_00221675 EFTA01378322