Credit Risk Falls as Greek Optimism Adds to Obama’s U.S. Victory
Sanofi (SAN), France’s largest drugmaker, Dutch energy companies Enexis Holding NV and Alliander NV and U.S. construction- equipment maker Terex Corp. were among issuers taking advantage of the boost in sentiment to sell bonds. The Markit iTraxx Crossover Index of credit-default swaps linked to the debt of 50 mostly junk-rated European companies fell two basis points to a more than two-week low of 505 as of 12:06 p.m. in London.
Greek Prime Minister Antonis Samaras is today seeking parliamentary approval for the austerity measures needed to obtain 31 billion euros ($40 billion) of international aid before a budget vote due to take place by Nov. 12. Across the Atlantic, Obama beat challenger Mitt Romney by a larger-than- expected margin to become only the second Democrat since Franklin Roosevelt to win a second term as president.
“Markets may express some relief that a long-drawn-out recount isn’t needed” in the U.S., Elisabeth Afseth, a fixed- income analyst at Investec Bank Plc in London, wrote in a note to clients. “Our central scenario sees the Greek government win the two votes this week.”
Sanofi is selling its first euro-denominated bonds since September 2009 and its first fundraising in any currency in more than a year, according to data compiled by Bloomberg.
The Paris-based pharmaceuticals company is raising 750 million euros from the five-year transaction, according to a person familiar with the deal, who asked not to be identified because they’re not authorized to speak about it. Spokesman Jean-Marc Podvin said the proceeds would be used for general corporate purposes including repayment of existing debt.
Terex (TEX), which bought German crane and harbour-equipment maker Demag Cranes AG in August, is issuing the equivalent of $850 million from its deal, a person with knowledge of the transaction said. Westport, Connecticut-based Terex will sell about $530 million and 250 million euros of bonds due in 2021 in a deal that will fund the buyback of existing 8 percent junior notes, the person said.
Enexis reduced the interest it’s offering on its 500 million euros of eight-year bonds, a person familiar with the terms said. The company, which last sold debt in January, is marketing the notes at a yield of 55 basis points more than the benchmark swap rate, down from an initial 55 to 65 basis-point spread, the person said. A basis point is 0.01 percentage point.
Alliander, which has already raised 800 million euros from bond markets this year, plans to sell 10-year senior notes, a banker on the deal said. The EFSF, the European Union’s temporary bailout fund, and the Slovak Republic are among other borrowers in the market today.
The Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies fell one basis point to 125, according to prices compiled by Bloomberg. Bank credit risk also declined, with the Markit iTraxx Financial Index of swaps tied to the senior debt of 25 banks and insurers down two basis points at 166, the lowest since Oct. 22.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A basis point on a contract protecting 10 million euros of debt for five years is equivalent to 1,000 euros a year.
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