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EDP Breaks 20-Month Deadlock as Peripheral Companies Sell Bonds

A sign stands at the entrance to a power plant, operated by EDP-Energias de Portugal SA. Photographer: Mario Proenca/Bloomberg
A sign stands at the entrance to a power plant, operated by EDP-Energias de Portugal SA. Photographer: Mario Proenca/Bloomberg

Energias de Portugal SA is selling the country’s first corporate bonds since January 2011 as companies in the euro-region periphery issue at the fastest pace in more than a year.

EDP, Portugal’s biggest utility, is selling 750 million euros ($978 million) of five-year senior unsecured bonds, according to a person with knowledge of the sale. It’s the country’s first corporate offering since Portugal Telecom SGPS SA sold 600 million euros of five-year bonds in January 2011, data compiled by Bloomberg show.

Companies from Spanish oil producer Repsol SA to Telecom Italia SpA sold more than 16.3 billion euros of bonds this month in the busiest two weeks for peripheral sales since March 2011. Borrowers are tapping record-low yields in a wave of optimism spurred by Germany’s ratification of the euro-area bailout fund and bond-buying programs from the European Central Bank President and the Federal Reserve.

“I think Portugal Telecom could also issue a bond in due course, there are only a few large Portuguese companies that issue bonds,” said Normen Fritz, a fund manager at Union Investment Privatfonds in Frankfurt.

European corporate bond yields have plunged to 2.54 percent from 4.4 percent at the start of the year, according to Bank of America Merrill Lynch’s EMU Corporates index. The extra yield investors demand to buy company bonds instead of benchmark German government debt fell 122 basis points this year to 179, the smallest spread since July 2011.

EDP’s new notes will be priced to yield 5.875 percent, said the person, who asked not to be identified because the information is private.

Rui Cabrita, a spokesman for EDP in Lisbon, didn’t respond to e-mail and phone requests for comment.

The Lisbon-based utility’s existing 4.75 percent bonds due 2016 fell 0.35 cent to 97.78 cents on the euro to yield 5.38 percent. The yield spread on the notes widened 10 basis points to 507.

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