Areva Bonds Surge as S&P Signals Rating Boost to New Company

  • Company to transfer nuclear-fuel business, including bonds
  • Confirms 5 billion-euro capital-raising plan for early 2017

Bonds of Areva SA surged the most on record after S&P Global Ratings said it may upgrade its ranking of a new company created to handle the troubled French atomic-reactor maker’s fuel operations, including its bonds.

The parent company’s 750 million euros ($836 million) of 3.125 percent bonds due March 2023 rose 7.4 cents on the euro to 92 cents on Wednesday, the most since the notes were issued in 2014, according to data compiled by Bloomberg. Its November 2019 notes also jumped the most since they were sold in October 2009.

Areva is pushing through with plans to restructure, raise capital and sell assets after the state-owned company suffered five straight years of losses. The move won approval from S&P with the rating company on Tuesday saying its B+ grade on the new unit may be raised should it receive the bulk of a planned 5 billion-euro capital injection. 

“Given where the bonds were trading and the massive selloff earlier in the year, it takes a piece of news like this to make investors finally believe that restructuring will take place,” said James Sparrow, a credit analyst at BNP Paribas SA in London. “S&P pointing to several notches of upgrades is also positive.”

Assets Transfer

Areva will transfer to the new company all assets and liabilities related to its nuclear-fuel cycle business, including all bondholder debt due after this year, it said in a statement on Tuesday. The entity’s risk profile is stronger than the group because it focuses on a profitable part of the business and has more predictable recurring revenue, S&P said.

Areva confirmed a plan to raise 3 billion euros of capital for the new unit and 2 billion euros for itself in the first quarter of 2017. That, including proceeds from share sales, will raise enough funds to pay its debt until 2019, it said in a separate statement on its website.

Officials at the Paris-based company declined to comment on the bond moves or the transfer of assets. Shareholders will meet to approve the deal on Nov. 3 and bondholders meetings are planned for Sept. 19.

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