Fiat, BMW Issuing Benchmark Bonds in Euros Due in Four Years

Fiat SpA, Italy’s biggest carmaker, and German rival Bayerische Motoren Werke AG are tapping credit markets to sell benchmark four-year bonds in euros.

The Italian company’s notes will be priced to yield about 7.75 percent, according to a person familiar with the offering, who asked not to be identified. Fiat’s existing 850 million euros of bonds due March 2017 fell the most in two months, dropping 0.97 cent to 98.23 cents on the euro, according to Bloomberg generic prices.

The offering is the Turin-based company’s first benchmark issue since March, according to data compiled by Bloomberg. Volkswagen AG, Europe’s largest carmaker, sold its first dollar bonds in four months yesterday as investors seek company securities for shelter against the economic slowdown.

A Fiat spokesman, who asked not to be identified citing company policy, declined to comment. The carmaker is rated Ba2 by Moody’s Investors Service, two levels below an investment grade ranking.

Bank of America Merrill Lynch, BNP Paribas SA, Citigroup Inc., JPMorgan Chase & Co., Morgan Stanley and Societe Generale SA are managing the sale, which is due to price today.

Luxury carmaker BMW’s 750 million euros of notes will be priced to yield 42 basis points more than the benchmark swap rate, according to a person with knowledge of the transaction, who asked not to be identified. That’s less than half the average 90 basis-point spread of the 77 securities contained in Bank of America Merrill Lynch’s Euro Automotive Index for three-year bonds.

The notes, being issued through BMW U.S. Capital and guaranteed by BMW AG, were initially marketed with a spread of 45 basis points to 50 basis points.

BayernLB, BNP Paribas, Mitsubishi UFJ and UniCredit SpA are managing the sale, which is also expected to price today.

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