Breaking News

Tweet TWEET

Ineos Plans Bond Sale as Junk Yields Decline to Record in Europe

Ineos Group Holdings SA is planning to sell a total of about 1 billion euros ($1.4 billion) of bonds in euros and dollars after borrowing costs for junk-rated debt fell to a record in Europe.

The world’s largest maker of phenol and nitrile chemicals is marketing five-year senior notes to repay all of its outstanding euro-denominated bonds due 2016, according to a person familiar with the sale. The average yield on speculative-grade bonds in euros fell four basis points to 4.71 percent, Bank of America Merrill Lynch index data show.

“There’s very strong demand for credit which is driving yields lower,” said Duncan Warwick-Champion, head of research at ECM Asset Management Ltd. in London, which oversees $8.6 billion in credit. “Investors with yield targets are dipping down into high yield as they can’t always get enough in investment-grade securities.”

Demand for corporate bonds is climbing after global equity markets racked up losses of $1.6 trillion this year amid a selloff in emerging-market assets. Investors don’t expect the number of companies defaulting on their debt to rise, helping spur appetite for junk-rated debt, according to Warwick-Champion.

The global default rate for speculative-grade companies will decline to 2.3 percent this year after falling to 2.6 percent in 2013, according to a Jan. 9 report by Moody’s Investors Service. The default rate for European junk debt will drop to 2.1 percent from 3.4 percent last year.

Innovia Debut

Another high-yield borrower seeking to raise debt in Europe is Innovia Films Ltd., a maker of cellulose packaging film acquired by Arle Capital Partners LLP in 2004. The company begins meeting investors in Europe today to market 340 million euros of six-year floating-rate notes that may be rated B2 by Moody’s, a person familiar with the matter said.

Innovia will use the proceeds to refinance debt and make a payment to its parent company, it said in a statement. A bond sale would be the first for the Wigton, U.K.-based company, according to data compiled by Bloomberg.

Also in credit markets today, Goldman Sachs Group Inc. (GS) is selling euro-denominated bonds due October 2021 to yield about 110 basis points more than the mid-swap rate, another person said. The New York-based bank last sold debt in the currency in January 2013, according to data compiled by Bloomberg.

The cost of borrowing in Europe relative to the U.S. is holding near the lowest in five years, Bank of America Merrill Lynch index data show. The average yield on investment-grade corporate bonds in euros is 1.25 percentage points less than comparable dollar notes.

To contact the reporters on this story: John Glover in London at johnglover@bloomberg.net; Katie Linsell in Madrid at klinsell@bloomberg.net

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.