Fiat’s Euro Bonds Spur Fastest Sales From Carmakers Since 2009
Fiat SpA (F) is raising 1.25 billion euros ($1.6 billion) from its first sale of bonds in the currency since July, helping spur the busiest start to a year for euro debt issuance from carmakers since 2009.
Fiat is selling high-yield notes due in five years at 6.625 percent, according to a person familiar with the matter. The deal lifts sales from carmakers to 11.5 billion euros this year, compared with 10.7 billion euros during the same period in 2012, according to data compiled by Bloomberg.
The issuance comes as European automakers face a sixth year of slumping sales. Turin-based Fiat said on Jan. 30 it may raise as much as 5 billion euros in bonds by the end of 2014 to “optimize the management” of debt, which totals 15.8 billion euros, according to Bloomberg data.
“Autos is an industry facing secular pressure in Europe, compounded by the macro pressure,” said Mitch Reznick who helps oversee about $41 billion at Hermes Fund Managers Ltd. in London. “The impact of these pressures is mitigated for Fiat by the company’s low leverage, market access, high cash balances and access to credit lines.”
Richard Gadeselli, a spokesman for Fiat, declined to comment on the bond sale.
Fiat’s new bonds are provisionally rated B1, four steps below investment grade, by Moody’s Investors Service and one step higher at BB- by Standard & Poor’s and Fitch Ratings.
The carmaker last sold securities in the single currency on July 11, when it raised 1 billion euros from 7.75 percent bonds due October 2016, data compiled by Bloomberg show. Those notes have since climbed 5.8 cents on the euro, outperforming the average increase of 0.6 cents among European carmakers that sold debt in euros and pounds since January 2012, according to data compiled by Bloomberg.
The average premium investors demand to hold Fiat’s debt rather than government bonds is 423 basis points, compared with 513 basis points for securities in Bank of America Merrill Lynch’s Euro High Yield Constrained Index.
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