Societe Generale Leads Drop in Credit Risk as Alstom Sells Bonds
Societe Generale SA (GLE) led a decline in the cost of insuring corporate debt in Europe after the French bank announced plans to leave Greece. Engineering firm Alstom SA (ALO) sold its first bonds in euros since January.
Credit-default swaps on Societe Generale fell for a fourth day to 214 basis points at 12:45 p.m. in London, paring an earlier decline to a 14-month low of 207, according to data compiled by Bloomberg. Alstom in Levallois-Perret, France offered investors a yield premium to buy its 350 million-euro ($453 million) offering of five-year notes.
SocGen began exclusive talks with Piraeus Bank SA on selling its stake in Athens-based Geniki as overseas lenders offload their Greek units amid concerns the country won’t stay in the euro. Confidence in SocGen and Italian banks including Intesa Sanpaolo SpA also improved after the European Banking Authority said the lenders exceeded capital requirements.
“The market is definitely prepared to reward people for de-risking and certainly de-risking in Greece,” said Roger Francis, an analyst at Mizuho International Plc in London.
Societe Generale’s 11.6 percent core tier 1 capital ratio, a measure of a lender’s financial strength, surpassed the EBA’s 9 percent target, while France’s four biggest banks had a capital surplus of 23.3 billion euros as of the end of June. Intesa had a core tier 1 capital ratio of 10.1 percent.
Credit-default swaps on the Italian lender declined eight basis points to 334. A decline signals improvement in perceptions of credit quality.
The European Central Bank kept its benchmark rate at a historic low of 0.75 percent today, a month after President Mario Draghi unveiled an unprecedented plan to buy the bonds of euro-area countries still mired in the sovereign debt crisis.
The Markit iTraxx Financial Index of credit-default swaps linked to senior debt of 25 banks and insurers fell one basis point to 186 and the subordinated index declined three to 321. A basis point on a contract protecting 10 million euros of debt for five years is equivalent to 1,000 euros a year.
Swaps on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings dropped three basis points to 546. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 0.5 basis point to 128.5.
Alstom’s bonds were priced to yield 143 basis points, or 1.43 percentage point, more than the benchmark swap rate, according to a banker with knowledge of the transaction. The premium is 20 basis points more than the average spread on securities in Bank of America Merrill Lynch’s EMU Corporates, Non-Financial Index.
Yield spreads on investment-grade corporate bonds have narrowed 40 basis points relative to swaps this year to a 2 1/2- week low of 123 basis points, the index data show. Sales of non- financial company securities soared to 51 billion euros in September, the busiest month for offerings since May 2009.
Alstom Chief Executive Officer Patrick Kron said today’s bond sale was 10 times oversubscribed in “very favorable conditions.” The proceeds will be used as part of the company’s regular funding needs, he said, and follows an Oct. 2 share sale.
To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net