Carrefour Forced to Reprice Its Bond Sale on Moody’s Review
Carrefour SA (CA), the second-biggest retailer, was forced to increase the pricing of its first benchmark bond in more than a year after a cut in its profit forecast prompted Moody’s Investors Service to put the company’s rating on negative review.
Carrefour boosted the interest on its 500 million-euro ($690 million) bond due 2018 to 285 basis points more than the benchmark swap rate, a banker involved with the transaction said, from the 250 basis-point price talk. It’s the French supermarket’s first benchmark issue since it sold 1 billion euros of 2021 bonds in July 2010, according to data compiled by Bloomberg.
The Boulogne-Billancourt, France-based company followed borrowers including Iberdrola SA (IBE) and Telecom Italia SpA (TIT) to the bond market amid optimism policy makers will come up with what they call a “durable” solution to the euro-region crisis. Moody’s put Carrefour’s Baa1 rating under review for a possible downgrade today after the retailer cut its 2011 profit forecast for the second time in three months.
“Carrefour is an absolute giant and I have no doubt that there’ll be a turnaround eventually, but not soon enough to prevent Carrefour’s credit rating being cut,” said Torstein Jorstad, a credit analyst at Societe Generale SA in London.
An external spokesman for Carrefour, who declined to be identified citing internal policy, confirmed the terms of the bond and said the issue was to refinance forthcoming debt redemptions. He wouldn’t comment on the Moody’s review and initial price talk.
Finance ministers and central bankers from the Group of 20 started talks in Paris about how to end the two-year-old sovereign crisis, aiming to come up with a plan at an Oct. 23 summit. Speculation they’ll draw a line under the region’s woes helped push down borrowing costs for companies this week, with the extra yield investors demand to hold European corporate notes rather than benchmark government debt dropping 18 basis points to 186, Bank of America Merrill Lynch index data show.
“With roughly another week to go to the summit, we think there are probably two or three active days before the market will slow down and get ready for the 23rd,” Anke Richter, a strategist at Mizuho International Plc in London, wrote in a note to investors.
Carrefour’s 3.875 percent senior unsecured bonds due April 2021 fell as much as 5 percent, the biggest drop ever, to 88.42 cents on the euro today and were at 88.58 cents as of 4:50 p.m. in Lonon. The securities, sold on July 22, 2010, have lost 9 percent of their value in the past three weeks, according to Bloomberg Bond Trader prices.
Banca IMI SpA, Barclays Capital, Credit Agricole CIB, ING Groep NV, Natixis and Royal Bank of Scotland Group Plc managed the French retailer’s new deal, said the banker involved in the offering.
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