Aeroporti di Roma SpA sold bonds in euros after borrowing costs for companies from Europe’s peripheral nations fell to the lowest in almost four years relative to core countries led by Germany and France.
The extra yield investors demand to hold corporate bonds from countries such as Italy, Spain and Portugal dropped 17 basis points this week to 0.3 percentage points, the lowest premium since February 2010, Bank of America Merrill Lynch index data show. The Italian airport operator, a unit of Atlantia SpA (ATL), issued 600 million euros ($817 million) of notes due February 2021, according to a person familiar with the matter.
Bonds from Europe’s most indebted countries rallied after Standard & Poor’s and Moody’s Investors Service raised Spain’s credit rating outlook to stable amid signs of an economic recovery. Investor demand is also buoyed by the European Central Bank’s record low interest rates, which President Mario Draghi said today will remain for an extended period.
“Peripheral bonds have seen a lot of inflows from foreign investors as there’s been a change of perception towards these countries,” said Jose Ignacio Victoriano, a fixed-income manager overseeing about 1 billion euros of bonds at Renta 4 Gestora SGIIC SA in Madrid. “The change of outlook by S&P has sparked a rally.”
Aeroporti di Roma’s notes were priced to yield 165 basis points more than the benchmark mid-swap rate, said the person, who asked not to be identified before the transaction is completed. Proceeds will be used to redeem senior secured notes due February 2015, according to Moody’s, which rated the notes a provisional Baa3 on Nov. 27, the lowest investment grade level.
S&P upgraded the airport operator by two levels to BBB+ or three levels above junk on Dec. 2 citing its plan to refinance debt early.
Also in the new issue market today, state-run Italian transportation company Ferrovie Dello Stato SpA is marketing 600 million euros of eight-year notes to yield 180 basis points more than swaps, another person said.
“The periphery is nowhere near out of the woods,” Suki Mann, a strategist at Societe Generale SA in London, wrote in a note to clients today. “But the improved tone and investor confidence, as well as the demand for higher-yielding paper, will see a good bid prevail for the region’s corporate sector.”
To contact the reporter on this story: Katie Linsell in Madrid at firstname.lastname@example.org