BHP Leads Overseas Borrowers as U.S. Corporate Issuance Recovers

International borrowers BHP Billiton Ltd., the world’s largest miner, and ArcelorMittal are leading more than $24 billion of corporate bond sales in the U.S. this week as volume recovers from a mid-month slump.

BHP raised $5.25 billion of debt on Feb. 21, its largest offering on record, to pay down existing obligations and for general corporate purposes, according to data compiled by Bloomberg. ArcelorMittal sold $3 billion of three-, five- and 10-year notes yesterday, the Luxembourg-based steelmaker said in a regulatory filing.

Issuance is poised to rise by more than 53 percent from $15.9 billion last week, after European leaders approved a second bailout for Greece and the Bloomberg Consumer Comfort Index in the U.S. rose to the highest level since April 2008. Overseas companies have sold more than $187 billion of bonds in the U.S. in 2012, the fastest start to a year in data going back to 1999.

“Markets were definitely skittish leading up to the agreement on the Greek debt writedown,” Marc Pinto, head of corporate bond strategy at Susquehanna International Group LLP, said in an e-mail. “With that out of the way, an all-clear bell has been sounded, and we are off to the races in the primary market once again.”

Investment-grade corporate bond yields declined to 3.50 from 3.54 after recording the first rise in a month last week, Bank of America Merrill Lynch Index data show. Yields on speculative-grade bonds fell to 7.62 percent from 7.71 percent on Feb. 17. High-yield, high-risk, or junk, bonds are rated below Baa3 by Moody’s Investors Service and BBB- at Standard & Poor’s.

3rd-Biggest Issue

Returns on debt from the most creditworthy to the riskiest corporate borrowers reached 0.42 this week, accounting for most of the 0.52 percent February gains in the Bank of America Merrill Lynch U.S. Corporate & High Yield Master Index.

BHP’s issue was the third-biggest in the corporate market this year, following $7 billion sales from SABMiller Plc and Petroleo Brasileiro SA. The Melbourne-based miner has said it’s considering $80 billion in spending over the next five years to add output of iron ore, copper and coal.

ArcelorMittal’s issue was its first in almost a year. It sold $3 billion of five-, 10-and 30-year notes on Feb. 28 in its previous offering. Reliance Industries Ltd., Banco Bradesco SA, and DBS Bank Ltd. also tapped the U.S. market this week.

Citigroup Inc. led domestic issuers, selling $1.25 billion of three-year notes as the New York-based company faces a wall of maturities from the U.S. government’s Temporary Liquidity Guarantee Program, instituted in 2008 to help stem the global financial crisis.

‘Extremely Challenging’

“When we look at the U.S. and European markets side-by-side, it’s fairly evident that issuing debt in Europe is extremely challenging right now,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “It’s more efficient for companies to sell debt in the U.S. rather than risk a failed deal in Europe, he said.

European leaders agreed on a second bailout package of 130 billion euros ($172 billion) for Greece after weeks of wrangling. A deal was also reached with private creditors to help the country stave off an immediate default.

The Bloomberg Consumer Comfort Index rose to minus 38.4 in the week ended Feb. 19 from minus 39.8. The level associated with recessions and their aftermath is minus 40.

“Decent economic indicators stateside are helping investors to keep their glass-half-full attitude firmly in place,” Susquehanna’s Pinto said. “The fact is that dollar funding, whether you are a domestic company or not, is accessible at extremely attractive levels right now on an all-in basis.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE