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Philip Morris Sells Bonds Amid Busiest European Market This Year

March 14 (Bloomberg) -- Philip Morris International Inc., the largest publicly traded tobacco producer, and Telefonica SA of Spain sold bonds in Europe as companies raise money at the fastest pace this year.

They’re taking advantage of near record-low borrowing costs, while uncertainty over European growth and Italy’s political future fuel a sense of urgency. The euro-region economy will shrink 0.2 percent this year, according to the median of 51 economists surveyed by Bloomberg News.

“Between weak growth and uncertainty over Italy’s government, you have reasons to borrow sooner rather than later,” said Andrew Sheets, the head of European credit at Morgan Stanley in London.

Philip Morris offered 2 billion euros ($2.6 billion) of bonds in its first fundraising in the currency since May, while Madrid-based Telefonica issued benchmark-sized notes for the first time since January, people familiar with the transactions said. Including today’s deals, non-financial companies will have sold at least 9.8 billion euros of bonds this week, making it the busiest period for issuance this year, according to data compiled by Bloomberg.

Yields on investment-grade bonds in euros fell to 1.92 percent from 2.23 percent at the end of January, approaching the record-low 1.81 percent reached Dec. 7, according to Bank of America Merrill Lynch’s Euro Non-Financial Index. A basis point is 0.01 percentage point.

Bond Terms

New York-based Philip Morris is issuing 1.25 billion euros of seven-year bonds at a yield of 55 basis points more than the benchmark swap rate and 750 million euros of 12-year notes with an 83 basis-point spread.

Telefonica in Madrid is selling eight-year notes that will be priced to yield about 260 basis points over swaps, according to a person familiar with the deal. Spain’s biggest phone company also offered to buy back as much as 100 million pounds ($149 million) of bonds due next January.

Miguel Angel Garzon, a spokesman for Telefonica in Madrid, declined to comment on the debt issue.

St. Louis, Missouri-based Belden Inc., a maker of cable and networking products, is selling 300 million euros of 10-year senior subordinated bonds callable after five years, a person with knowledge of the deal said. German builder Hochtief AG, and Europe’s largest tax and legal publisher Wolters Kluwer NV also issued benchmark-sized bonds in euros today.

To contact the reporter on this story: Jennifer Joan Lee in London at jlee176@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net

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