EUROBONDS: Corporates Pile Into Primary As Demand For Credit Soars

Date : 03/20/2012 @ 10:59AM
Source : Dow Jones News
Stock : Thermo Fisher Scientific (TMO)
Quote : 212.41  0.93 (0.44%) @ 6:10PM

EUROBONDS: Corporates Pile Into Primary As Demand For Credit Soars

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Italian auto maker Fiat SpA (F.MI) led a bumper day of corporate deals in the European primary bond market as issuers look to take advantage of narrowing credit spreads.

Fiat is set to price its EUR850 million, five-year bond to yield at 7%, its first euro deal since a EUR1.5 billion two-part offering last July.

"The blackout period is over, appetite for credit is strong and money that was invested in short-term debt such as treasuries in the second half of last year is coming back and being put to work," a syndicate banker said.

German auto maker Daimler (DAI.XE) was back in the market Tuesday with a EUR750 million, seven-year deal. It is the fourth time Daimler has issued paper this year, following two euro deals last month and a sterling bond at the end of January.

Tuesday's deal priced at 65 basis points over midswaps.

French energy company Electricite de France SA (EDF.FR) also returned with a two-part, long-dated euro and sterling issue. EDF was last in the market back in January when it sold a GBP250 million, maturing October 2041.

France's Vinci SA (DG.FR), a construction company, continued the recent spate of French deals with a EUR750 million, eight-year bond set to price at 125 basis points over midswaps.

It is the sixth euro deal from a French corporate in the last week.

Belgian national rail company SNCB Holding SA was also looking to tap the primary market with a 12-year euro note.

In the U.K., mobile phone operator Everything Everywhere is back in the market with its debut sterling bond following its inaugural euro issue earlier this year.

Anglian Water Services Financing PLC followed up its investor call Monday with a GBP250 million, 15-year bond. It is the U.K. water company's first deal since July last year.

European debt insurance costs continued to push higher as the credit default swap rally seen in recent days pauses and spreads move into correction mode.

Around 1400 GMT, series 7 of the SovX Western Europe index, which investors can use to buy or sell credit default swaps on a basket of 15 sovereign borrowers, was at 271/277 basis points, according to data provider Markit.

The updated series 7 index includes Cyprus, following the removal of Greece.

Credit default swaps are derivatives that function like a default insurance contract for debt. If a borrower defaults, sellers compensate buyers.

Series 17 of the iTraxx Europe index, which comprises 125 high-grade borrowers, 25 of which are banks and insurers, was at 116/116 basis points. Series 17 of the Crossover index of 40 mostly sub-investment-grade European corporate borrowers was at 559/562 basis points.

Both updated corporate indexes are trading wider than the previous series.

-By Ben Edwards, Dow Jones Newswires; 44-20-7842-9287; (Serena Ruffoni in London contributed to this article.)

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