Magyar Telecom Bonds Tumble on Capital Review as Debt Sales Slow
Magyar Telecom BV bonds fell to a record after the company said it will review its capital structure, while debt sales slowed in Europe.
Magyar Telecom’s 350 million euros ($468 million) of notes due in 2016 and which the company may redeem this December, dropped 8.4 cents on the euro to 41.8 cents at 2:06 p.m. in London, the lowest since they were sold in 2009, data compiled by Bloomberg show. The Hungarian telecommunications service provider will review its balance sheet because of new tax laws and the country’s “weak” economy, it said in a statement.
Bond issuance by non-financial companies in euros and pounds slowed to 4 billion euros last week, the least this year, according to data compiled by Bloomberg. The securities yield 2.2 percent on average, compared with the 1.9 percent record-low reached on Dec. 28, Bank of America Merrill Lynch Euro Corporate Index shows.
“Investors are frustrated at the low level of yields and relatively tight spreads in credit markets,” said Suki Mann, a strategist at Societe Generale SA in London. “Economic and political risks are also rising again. It’s caused volumes to fall significantly and turnover is at very low levels.”
Global corporate bond sales also slowed last week, following the busiest ever start to a year. Companies sold about $51 billion of notes, the least since the first week of 2013 and less than half the $97.7 billion issued in the same period last year, according to data compiled by Bloomberg.
Magyar Telecom’s bonds are the biggest fallers on Bank of America Merrill Lynch’s Euro High Yield Constrained Index today.
Network Rail Ltd., the U.K. government-backed track and stations operator, sold 600 million pounds ($941 million) of floating-rate notes with a three-year maturity, according to data compiled by Bloomberg. It’s the London-based company’s second bond sale this year.
Philip Morris International Inc. is also in the market with a bond issue. The world’s largest publicly traded tobacco company is selling 200 million Swiss francs ($218 million) of six-year bonds in a deal that may price today, people familiar with the transaction said.
Credit-default swaps insuring PSA Peugeot Citroen’s debt slumped 12 basis points to 720, near the lowest in two weeks. The carmaker’s finance arm was granted temporary approval from the European Union to receive a French government guarantee backing the sale of 1.2 billion euros of new bonds.
France must submit a restructuring plan covering the entire Peugeot group within six months to win final approval for the guarantee, which covers Banque PSA Finance’s three-year bonds, the European Commission said in an e-mailed statement.
The yield premium investors demand to hold Peugeot’s 1 billion euros of 4.25 percent notes due 2016 over similar- maturity government debt declined 1 basis point to 363 basis points, according to Bloomberg generic prices.
The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly speculative-grade ratings rose three basis points to 452, according to prices compiled by Bloomberg.
The Markit iTraxx Europe Index was little changed at 116, while the Markit iTraxx Financial Index of swaps on 25 banks and insurers rose one basis point to 156.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A basis point on a contract protecting 10 million euros of debt for five years is equivalent to 1,000 euros a year.
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