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Aston Martin Bonds Surge as BMW Joins With Fiat to Sell New Debt

Nov. 26 (Bloomberg) -- Aston Martin bonds surged amid reports of bidding for a stake in the luxury sports car-maker, while Germany’s Bayerische Motoren Werke AG and mass-market rival Fiat SpA led a jump in new issuance before the year-end holidays.

Aston Martin’s 304 million pounds ($487 million) of 9.25 percent 2018 bonds rose 5.1 percent to 96.6 pence at 2 p.m. in London, the highest since the notes were issued in June 2011, data compiled by Bloomberg show. Corporate debt sales reached 4 billion euros today, a 55 percent jump from the daily average for the year.

Investment Dar Co. and other Kuwaiti investors who own Gaydon, England-based Aston Martin received bids for half the maker of luxury cars featured in James Bond movies, according to people familiar with the matter. Investindustrial, a European private-equity fund based in London, offered just under 250 million pounds, which was trumped by a higher bid from Indian automaker Mahindra & Mahindra Ltd., they said.

“With the valuations reported by the press, that implies Aston Martin bonds are going to trade at par at a minimum, and there’s always the possibility of a tender” for the existing debt, said Peter Higgins, a London-based senior high-yield portfolio manager at BlueBay Asset Management Ltd., which manages about $47 billion.

Change of Control

A sale would help Investment Dar, part of a group that bought the company from Ford Motor Co. in 2007, pay off debt. The winning bidder will get 50 percent of the voting rights and a 40 percent equity stake, one of the people said. Investment Dar, the other Kuwaiti investors and Aston Martin management will retain the rest, the person said.

Aston Martin’s notes have a change of control clause where it must redeem bondholders at 101 percent of the face amount when a new owner controls more than 50 percent of the company’s voting stock, according to the prospectus for the securities.

“The market might be getting ahead of itself as people are speculating on a takeover that would trigger the change of control clauses in the bond, or that the bond could be tendered,” said Arndt Muthreich, a credit analyst at Knight Capital Europe Ltd. in London. “The size of the stake may not be large enough to trigger a change of control and the bonds could drop again. The devil is in the detail.”

Risk Rises

Bond risk rose amid speculation euro-area finance ministers will struggle to work out a deal to unlock aid-package funds to Greece today, less than a week after the first attempt failed. Investor sentiment was also dented as U.S. leaders wrestle with an agreement to avoid triggering tax increases and spending cuts in January that could lead to a recession.

The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield ratings rose eight basis points to 504, signaling deterioration in perceptions of credit quality. The gauge had fallen 65 basis points last week in the biggest weekly decline since September.

Yields on corporate bonds rose last week to 1.93 percent on average, up from a record 1.88 percent on Nov. 11, according to Bank of America Merrill Lynch’s EMU Corporates, Non-Financials index. That compares with 3.33 percent at the start of the year.

Companies are selling debt now to take advantage of yields near record lows and because “it’s the last window” of issuance for the year, said Frank Hussing, a credit analyst at Commerzbank AG in Frankfurt.

BMW, Fiat

BMW will sell 750 million euros ($972 million) of bonds due June 2018, while Fiat is adding to its 7.75 percent notes due 2016, according to people with knowledge of the deals. BMW’s sale is its largest in the currency since July, data compiled by Bloomberg show.

BASF SE, the world’s largest chemicals company, will sell 1 billion euros of 10-year bonds while Belgian water company Eandis CVBA will price 500 million euros of similar-maturity bonds to yield 115 basis points, or 1.15 percentage point, more than the benchmark swap rate, people with knowledge of the deals said. Nestle SA, the world’s biggest food company, plans to sell 400 million pounds of 11-year bonds.

Fiat, which has 1 billion euros of 6.625 percent bonds coming due in February, led declines in Bank of America Merrill Lynch’s Euro Non-Financial High-Yield Constrained Index today. The Turin-based carmaker’s 7.75 percent bonds due 2016 fell 1 percent to 102.12 cents on the euro, pushing the yield to a one-week high of 7.1 percent, data compiled by Bloomberg show.

Covered Bonds

Spain’s Banco Bilbao Vizcaya Argentaria SA is selling five-year covered bonds to yield about 260 basis points more than the benchmark swap rate, according to a banker with knowledge of the deal. That compares with 155 basis points that Spain’s second largest lender paid in March 2011 to sell 2 billion euros of 2015 covered bonds, the last benchmark-sized sale of the secured debt, Morgan Stanley and Deutsche Bank AG data show.

The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 2 basis points to 124. Bank bond risk also climbed, with the Markit iTraxx Financial Index on the senior debt of 25 banks and insurers up four basis points to 165, while subordinated debt increased six to 287.

Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A basis point on a contract protecting 10 million euros of debt for five years is equivalent to 1,000 euros a year.

To contact the reporter on this story: Hannah Benjamin in London at

To contact the editor responsible for this story: Paul Armstrong at

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