Verizon is a major user of derivatives to manage its exposure to interest rates and currencies, reporting US$32.5bn of cross-currency swaps and US$26bn of interest rate swaps notional outstanding at the end of the third quarter, according to regulatory filings. It has also signed collateral agreements with swap counterparties, leaving it vulnerable to potential liquidity shocks. Verizon declined to comment.
Verizon held US$2.9bn of cash and cash equivalents at the end of last year, about US$2bn less than the additional collateral it has had to post in 2022. The telecoms company had managed to increase its cash buffer to US$3.6bn at the end of September despite the derivatives margin calls. Among other things, Verizon has massively upped its issuance of commercial paper to US$26.5bn, leaving it with US$4.6bn of that short-dated funding outstanding at the end of the third quarter after repaying US$21.9bn throughout the rest of the year. By comparison, Verizon issued just US$3.4bn of commercial paper in 2021 and repaid the full amount, leaving it with none outstanding at the end of the year.