Wind Leads Busiest Week of Europe Junk Bond Sales in Month

Wind Acquisition Finance SA, a subsidiary of Italy’s third-largest mobile provider, is selling an equivalent $653 million of high-yield bonds, leading the busiest week of European junk issuance in a month.

The financing arm of Wind Telecomunicazioni SpA joins Elior SCA, a French catering firm owned by Charterhouse Capital Partners LLP, and TeamSystem SpA, an Italian computer software provider, in raising $1.5 billion, according to people familiar with the deals. That makes this the busiest week of issuance since the period beginning March 18, according to data compiled by Bloomberg.

Speculative-grade companies have sold 23.4 billion euros ($30.6 billion) of bonds this year, the busiest start to any year, as yields hold near record lows. Junk bonds have returned 2.6 percent this year, compared to 1.4 percent for investment- grade bonds, according to Bank of America Merrill Lynch data.

“We are hearing of a significant pipeline for the month of April for European high-yield deals,” said Steven Mitra, a London-based partner at LNG Capital LLP who is investing in the Wind and Elior deals. “Spreads are tighter and corporates are making the most of this environment. Investors are definitely cautious with the tighter pricing, but given where the global environment is at present, corporate credit still offers one of the best risk-adjusted returns amongst most asset classes.”

Yields on junk-rated non-financial company debt have fallen to 5.5 percent, just above a record low of 5.4 percent reached on Jan. 15, according to Bank of America Merrill Lynch’s Euro Non-Financial High Yield Constrained Index.

Spreads Narrow

The extra yield investors demand to buy high-yield bonds instead of government debt has fallen to 450 basis points, just above a near two-year low of 425 reached on Jan. 14, the index shows.

Wind, which is owned by Russia’s VimpelCom Ltd. (VIP), is selling at least $400 million of senior secured seven-year notes that can be bought back by the company after three years, and at least 150 million euros of floating-rate notes maturing in 2019 that are callable after one year, according to the people who asked not to be identified because they’re not authorized to speak about it. The two-part deal is expected to price tomorrow.

A spokesman for Wind Telecomunicazioni said the proceeds will be used for general corporate purposes.

The Rome-based company is planning to spend 1 billion euros in the next five years to build a high-speed mobile network, hiring Huawei Technologies Co. and Sirti SpA to supply equipment and infrastructure services, the companies announced last week.

Elior increased the size of its bond, which was issued through its Elior Finance & Co. SCA unit, to 350 million euros from 300 million euros. The senior secured notes, which mature in seven years and are callable after three, were priced to yield 6.5 percent, Bloomberg data show. The Paris-based company will use the proceeds from the sale to repay existing debt, according to people familiar. It recently raised a term loan of 453 million euros, Bloomberg reported yesterday.

TeamSystem raised 300 million euros in its first bond sale. The Pesaro, Italy-based company sold senior secured seven-year bonds callable after three years that were priced to yield 7.375 percent.

To contact the reporter on this story: Katie Linsell in London at klinsell@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

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