Prudential Sells Pound Bonds as European Credit Risk Increases
Prudential Plc (PRU), the U.K.’s biggest insurer by market value, sold 300 million pounds ($478.5 million) of bonds as credit risk rose for a third day in Europe on concern the region’s debt crisis will worsen.
The company priced senior unsecured securities due in three years at 108 basis points more than the midswaps rate, according to a person with knowledge of the deal, who asked not to be identified because they’re not authorized to speak. The Markit iTraxx Financial Index on the senior debt of 25 banks and insurers rose five basis points to 180 at 3 p.m. in London, the highest since Oct. 29.
Corporate debt sales are heading to about 6.4 billion euros ($8.2 billion) this week, as companies including Carlsberg A/S (CARLA), the world’s fourth-largest brewer, take advantage of the lowest borrowing costs in 18 months. Issuers are confident even as the Bank of France said the nation may fall into a recession and Greece struggles to meet the terms of its bailout.
“Although spreads have been edging a bit wider in the last few days this will still be extremely cheap funding for Prudential by almost any historic standard,” said Roger Francis, a credit analyst at Mizuho International Plc in London.
Prudential last sold fixed-rate debt in pounds when it priced 250 million pounds ($318 million) of 3.375 percent bonds in January 2010, according to data compiled by Bloomberg.
Also in capital markets today, Lanxess AG (LXS), the German chemical maker, sold 500 million euros of 10-year senior unsecured bonds priced to yield 107 basis points more than swaps, according to a banker involved in the deal. It’s the company’s first benchmark-sized sale in the currency since May 2011, Bloomberg data show.
In derivatives markets, the Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 1.5 basis points to 132. The Markit iTraxx Crossover Index of swaps linked to the debt of 50 mostly junk-rated European companies climbed one basis point to 533.
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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