Evonik Refinances as German Companies Get Lower Rates on Loans

Evonik Industries AG (EVK) completed syndication of a 1.75 billion-euro ($2.3 billion) loan as German companies replace credit lines with ones with lower interest rates.

Evonik, a maker of chemicals used in tire additives and ingredients for cosmetics and animal feed, plans to sign the facility in early September, people with knowledge of the matter said, who asked not to be named because the agreement is private. The loan for the Essen, Germany-based company includes portions with three- and five-year maturities paying margins more than benchmark rates of 35 and 40 basis points, or 0.35 to 0.40 percentage points, according to data compiled by Bloomberg.

German companies with investment-grade ratings have raised $14.8 billion of revolving credit facilities this year, compared with $11.4 billion in all of 2012, the data show. BASF SE, rated A+ by Standard & Poor’s, obtained a 3 billion-euro credit line in March at an interest rate of 25 basis points, down from 27.5 basis points paid on its previous loan.

“German companies are cash rich, richer than their French counterparts. They have made a lot of money and only invested it moderately,” said Sylvain Broyer, Natixis’s Frankfurt-based chief euro-region economist. “I see this trend of low pricing continuing because this is a very competitive market for banks, so corporates that show good balance sheets will benefit.”

Evonik’s new credit pact will replace a 1.5 billion-euro loan from 2011, which included portions paying interest margins from 60 basis to 75 basis points, data compiled by Bloomberg show.

Bank Competition

Rewe Group, a retail and tourism company which carries Standard & Poor’s lowest investment grade rating of BBB-, is seeking a five-year 1.75 billion-euro loan to replace a revolver it obtained in 2007, people familiar with the matter said. GEA Group AG (G1A) is also raising a 650 million-euro revolver to replace bank debt due in June 2015.

Competition among banks provides an opportunity for top-rated companies to borrow at cheaper rates, said David Owens, head of bank loans sales EMEA at RBS Markets, a part of Royal Bank of Scotland Group Plc.

“Borrowers are naturally price-sensitive and are therefore taking advantage of the opportunities to refinance deals at reduced pricing at a time when lenders are considered under lent,” Owens said.

UniCredit AG has arranged the most loans in Germany this year, taking a 12.5 percent market share with more than 5 billion euros committed, Bloomberg data show. German lenders Deutsche Bank AG and Commerzbank AG came in second and third with 10 percent and 9 percent.

Barclays Plc, BNP Paribas SA, UniCredit SpA are coordinating Evonik’s facility, the data show. In revolving credit facilities money repaid can be borrowed again.

To contact the reporter on this story: Stephen Morris in London at smorris39@bloomberg.net.

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net.

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