Hellenic Petroleum SA raised 830 million euros ($1.1 billion) of loans to replace borrowings from 2007 as Southern European companies offer higher interest rates to attract lenders.
Greece’s largest refiner got a 605 million-euro facility from a group of banks and a 225 million-euro loan arranged by Alpha Bank AE, according to an e-mailed statement from the company.
The financing is costing an average 250 basis points more than benchmark rates compared to previous loans, Andreas Shiamishis, the Athens-based company’s chief financial officer said in a telephone interview. The debt being replaced paid 25 basis points more than benchmark rates, according to data compiled by Bloomberg. A basis point is 0.01 percentage point.
“Now and then are different worlds -- 2007 was a golden period for borrowers with extremely low costs and exceptionally easy access to funding,” Shiamishis said. “Risk is now the priority for banks, and gaining business and profitability are much lower.”
Southern European borrowers are taking advantage of improved funding conditions amid signs efforts to contain the region’s debt crisis are working. The yield premium on bonds from companies in Europe’s periphery dropped to 202 basis points from a record high of 444 in June, according to Bank of America Merrill Lynch’s Euro Periphery Non-Financial Index. That’s up from 56 in 2007.
“Periphery countries are coming into the bond and loan markets now as investors have a lot of appetite for debt and are driven towards yield,” said Janin Campos, the London-based global head of loan syndications at Banco Bilbao Vizcaya Argentaria SA. “Periphery companies have learned over the last four years to live better with volatility; when they see the window of opportunity they’ll use it.”
Enel SpA, Italy’s largest power company, is offering banks a margin of as much as 225 basis points more than benchmarks on a five billion-euro credit line replacing a deal obtained in 2010, people involved in the deal said this week. The previous loan paid an initial margin of 85 basis points, according to data compiled by Bloomberg.
Spain’s largest phone company, Telefonica, is seeking a 1.25 billion euros of credit lines to extend debt maturing in 2014, people with knowledge of the deal said. It’s offering a margin of 200 basis points more than benchmarks, compared to initial interest of 65 basis points on the current facility, the data show.
Hellenic Petroleum, which operates three refineries in Greece, is also considering selling a bond in the coming months to diversify its funding and reduce its dependence on banks, Shiamishis said.
“Banks are really squeezed out of the market by regulators and risk departments,” Shiamishis said. “So bond issuance is a realistic and attractive option for us to consider over the next few month.”
Hellenic Petroleum’s new financing replaces a $1.25 billion facility due at the end of this month, as well as a 350 million-euro loan that matured in December. The shortfall will be made up using cash, Shiamishis said.