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Eutelsat Joins A2A Selling Bonds in Europe as Credit Risk Drops

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Dec. 9 (Bloomberg) -- Eutelsat SA, a French satellite operator, and Italian utility A2A SpA are marketing bonds in Europe as the cost of insuring corporate debt against losses declined.

Eutelsat is selling 930 million notes ($1.3 billion) due January 2020 while A2A is issuing 500 million euros of securities maturing in January 2022, according to people familiar with the deals. The Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies fell 2.2 basis points to 78 basis points at 2:51 p.m. in London, the lowest in a week.

Companies are raising funds in anticipation of an increase in borrowing costs as the global economic recovery strengthens. The Federal Reserve may begin scaling back stimulus measures as soon as next week, according to 34 percent of economists surveyed by Bloomberg, after the U.S. jobless rate fell to a five-year low in November.

“Companies have an incentive to sell debt now before a potential rise in yields once the Fed starts to taper its asset purchases, possibly as early as this month,” said Joseph Faith, a credit strategist at Citigroup Inc. in London. “Given that demand is likely to thin out at least somewhat from next week onwards, there’s every incentive to get deals done this week.”

Eutelsat is selling bonds to fund its $831 million acquisition of Satelites Mexicanos SA, which will be fully debt-financed, it said in a Nov. 28 statement. The Paris-based company’s notes will be priced to yield 135 basis points more than the benchmark mid-swap rate, according to a person with knowledge of the deal.

Capital Bonds

A2A, based in Brescia, Italy, is marketing its notes at a spread of 190 basis points, said the person familiar with the matter, who asked not to be identified before the transaction is completed.

The average extra yield investors demand to hold investment-grade bonds in euros over swaps was little changed at 88 basis points, the highest since Oct. 2, Bloomberg bond index data show.

Also in the new issue market, Societe Generale SA is meeting investors in New York for a second sale of low-trigger additional Tier 1 notes in dollars. The junior bonds, designed to meet new bank capital regulations, are written off or convert to equity when a lender’s core capital ratio falls below a certain percentage of risk-weighted assets.

France’s second-largest bank first sold the securities in August, when it issued $1.25 billion of 8.25 percent undated notes.

To contact the reporter on this story: Katie Linsell in Madrid at klinsell@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

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