McDonald’s Taps European Bond Market Where Sales Beat 2011
The world’s largest restaurant company by sales raised 500 million euros ($637 million) from 12-year notes yielding 53 basis points more than the benchmark swap rate, or 2.375 percent, according to data compiled by Bloomberg.
Companies, banks and agencies sold 639 billion euros of debt this year, a 9 percent increase from the same period in 2011, data compiled by Bloomberg show. Demand means highly rated borrowers are paying record-low coupons, with Nestle SA (NESN) issuing four-year notes last month that pay 0.75 percent and Siemens AG (SIE) offering 0.375 percent on 2014 bonds.
“This will be one of the lowest coupons McDonald’s has ever had to pay,” said Geraud Charpin, a fund manager at Bluebay Asset Management Ltd. in London, which oversees $47 billion. “The spread is attractive versus secondary paper, but the overall yield is quite unattractive. This is an industry that has been very stable and demand in credit has been high.”
The sale is McDonald’s first in the European currency since it raised 350 million euros from 4 percent bonds due 2021 in February last year. The notes yield 46 basis points more than swaps, down from an issue spread of 57, according to data compiled by Bloomberg.
Societe Fonciere Lyonnaise SA (FLY), the French real-estate company, sold 500 million euros of five-year bonds yielding 275 basis points more than the benchmark swap rate. The Paris-based firm returned to the bond market after pulling a sale of 500 million euros on Sept. 11 that was offered at a spread of about 250 basis points.
SFL’s existing debt was one of today’s worst performers in Bank of America Merrill Lynch’s investment-grade bond index, with the yield premium on its existing 4.625 percent notes due 2016 widening eight basis points relative to German government debt.
The cost of insuring against default on European corporate debt rose for a second week, signaling deterioration in perceptions of credit quality.
The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings rose 31 basis points this week to 565. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings climbed six basis points to 137.
The Markit iTraxx SovX Western Europe Index of credit- default swaps on 14 governments increased nine basis points this week to 126.
The Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers rose seven basis points this week to 187 and the subordinated index rose eight basis points to 319.
A basis point on a credit-default swap protecting 10 million euros ($12.7 million) of debt from default for five years is equivalent to 1,000 euros a year. 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.
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