LyondellBasell Sells $1 Billion of Bonds; Credit Swaps Increase

LyondellBasell Industries NV (LYB), the world’s largest producer of polypropylene, issued $1 billion of bonds to help fund stock buybacks. A measure of U.S. corporate credit risk rose.

LYB International Finance BV, a unit of the company that emerged from bankruptcy in April 2010 after cutting debt and closing production sites, sold 4.875 percent, 30-year securities that yield 130 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg.

The plastics maker, based in Rotterdam, last sold securities in July, issuing $750 million each of 5.25 percent, 30-year debt and 4 percent notes due 2023, Bloomberg data show. The 5.25 percent bonds traded at 105.6 cents on the dollar to yield 4.89 percent at 3:52 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

“LyondellBasell is a classic ‘rags to riches’ story,” Michael Kraft, a senior money manager at Vanderbilt Avenue Asset Management in New York, said in an e-mail. “Since it emerged from bankruptcy, the company has done quite well. It’s become a solid investment-grade company, and management is using its improved financial position to reward its shareholders via buybacks.”

Proceeds from the bond sale may also include “funding for working capital, capital expenditures and acquisitions,” the company said in a regulatory filing today. The debt is rated Baa1 by Moody’s Investors Service, Bloomberg data show.

Office Depot

The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark used to hedge against losses or to speculate on creditworthiness, increased 0.5 basis point to 64.4 basis points as of 4:37 p.m. in New York, according to prices compiled by Bloomberg. The measure rose from 63.9 basis points yesterday, the lowest closing level in a week.

The swaps gauge typically climbs as investor confidence deteriorates and falls as it improves. The contracts pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

The cost to protect the debt of Office Depot Inc. (ODP) for five years touched the highest intraday level since April 2013. It rose as much as 52.5 basis points to 337.5 basis points before being quoted at 322.5 basis points, according to data provider CMA, which is owned by McGraw Hill Financial Inc. and compiles prices quoted by dealers in the privately negotiated market.

The office-supply chain that completed a merger with OfficeMax Inc. in November, reported an unexpected loss of 3 cents a share in the fourth quarter, below the 3 cents a share average estimate of 11 analysts surveyed by Bloomberg.

PepsiCo Offering

Regal Entertainment Group (RGC), the biggest U.S. cinema operator by revenue, sold $775 million of 5.75 percent, eight-year notes that yield 337 basis points more than similar-maturity Treasuries, Bloomberg data show. Proceeds may be used to refinance Regal’s $311.4 million of 9.125 percent notes maturing in 2018, the company said today in a statement.

PepsiCo Inc. (PEP), the world’s second-largest soft-drink maker after Coca-Cola Co., issued $750 million of 0.95 percent, three-year debt that yields 30 basis points more than benchmarks and $1.25 billion of 3.6 percent securities maturing in 10 years with a relative yield of 92 basis points, Bloomberg data show.

Proceeds from the sale will be used for the repayment of commercial paper, according to a regulatory filing today. Corporations sell commercial paper, typically maturing in 270 days or less, to fund everyday activities such as rent and salaries.

The risk premium on the Markit CDX North American High Yield Index, tied to the debt of 100 speculative-grade companies, widened 1.1 basis points to 318.4, Bloomberg prices show. Speculative-grade bonds are rated below Baa3 by Moody’s and less than BBB- at Standard & Poor’s. A basis point is 0.01 percentage point.

The extra yield investors demand to hold investment-grade corporate bonds rather than government debt was little changed at 100, Bloomberg data show.

To contact the reporter on this story: Jessica Summers in New York at jsummers20@bloomberg.net

To contact the editor responsible for this story: Shannon D. Harrington at sharrington6@bloomberg.net

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