Cogemat Postpones Euro-Denominated Bond Sale as Issuance Slows
Gruppo Cogemat SpA postponed its debut sale of bonds as company borrowing in Europe slowed last week to the least this year. Corporate bond risk fell to the lowest in 10 weeks.
The Italian gaming machines operator planned to issue 165 million euros ($219 million) of five-year bonds, according to a person with knowledge of the plan, who asked not to be identified because the details are private. Companies sold 5.3 billion euros of bonds last week, the least this year and below the weekly average of 13.4 billion euros for 2013, according to data compiled by Bloomberg.
Credit markets in Europe are recovering from a two-month selloff after Federal Reserve Chairman Ben S. Bernanke signalled the central bank may reduce stimulus measures if the U.S. economy shows sustained improvement. The Markit iTraxx Europe Index of credit-default swaps on 125 companies with investment-grade ratings dropped 0.8 basis point to 95.2 basis points, the lowest since May 28.
“The market has slowed due to the summer lull but it does not necessarily mean investor appetite has diminished,” said Harpreet Parhar, a credit strategist at Credit Agricole SA (ACA) in London. “We’ve entered August in reasonably good shape.”
Cogemat’s notes, which were expected to be rated B by Standard & Poor’s, five levels below investment grade, were to be used to refinance debt, pay a dividend and for general corporate purposes, the person said. Cogemat SpA and Cogetech SpA were guaranteeing the bonds.
A spokeswoman for Milan-based Cogetech declined to comment on the bond sale.
The average yield investors demand to hold high-yield euro bonds fell to 4.74 percent, one basis point from the lowest since June 4, while the rate on investment-grade debt dropped to 1.95 percent, approaching the lowest since June 19, Bloomberg index data show.
The Markit iTraxx Crossover Index of default swaps on 50 high-yield companies dropped 2.2 basis points to 395.6 today, the lowest in two weeks. A decrease signals improvement in perceptions of credit quality.
A basis point on a credit-default swap protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year. 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.
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