Ardagh Offers Biggest Junk Deal in 2 Years as Debt Risk Falls
Ardagh Group, the packaging company buying Cie. de Saint-Gobain SA’s U.S. glass bottle unit, is issuing the most high-yield bonds from a European issuer in two years as junk debt risk falls to an 18-month low.
Ardagh is raising $1.45 billion in a sale of notes in dollars and euros to fund the acquisition, the company said today. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield ratings fell for a fifth day to the lowest since July 2011.
Luxembourg-based Ardagh’s offering is the biggest high- yield deal since Wind Telecom SpA sold 1.48 billion euros of bonds in November 2010 and follows a record 77 billion euros ($103 billion) of junk issuance last year, data compiled by Bloomberg show. Ardagh joins miner New World Resources Plc in selling junk bonds today as investor demand for higher-yielding securities drives borrowing costs to record lows.
“There is a growing risk appetite with investors,” said Aengus McMahon, an analyst at ING Groep NV in London. Ardagh is a “very well-liked business.”
Yields on junk bonds have sunk to 5.27 percent from 12 percent a year earlier, according to Bank of America Merrill Lynch’s Euro High-Yield Constrained Index. Speculative-grade, or junk, debt is rated below Baa3 by Moody’s Investors Service and BBB- by Fitch Ratings and Standard & Poor’s.
Ardagh plans to issue $750 million of senior, secured notes due 2022, and $700 million of senior bonds due 2020, according to people with knowledge of the transaction. Investor meetings organized by bookrunner Citigroup Inc. will be held in Europe and the U.S. until Jan. 16.
New World Resources, the biggest producer of coking coal in the Czech Republic, is offering eight-year bonds that will help refinance debt coming due in 2015, said people with knowledge of the deal that asked not to be named because they’re not authorized to speak about it. The Amsterdam-based company’s existing 7.875 percent 2018 bonds are rated Ba3 by Moody’s and BB- at S&P.
Notes of PostNL NV, which holds a 29.8 percent stake in Dutch logistics company TNT Express NV, fell the most in Bank of America Merrill Lynch’s investment-grade index after United Parcel Service Inc. said it plans to call off its bid for TNT. Amsterdam-based PostNL’s 5.375 percent bonds due 2017 dropped 1.4 percent, pushing the yield up 34 basis points to 234 basis points more than benchmark government debt, Bloomberg data show.
In credit derivatives, the Markit iTraxx Crossover index fell as much as six basis points to 415, the lowest since July 2011, data compiled by Bloomberg show.
The Markit iTraxx Europe Index of contracts insuring 125 companies with investment-grade ratings fell two basis points to 100. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers decreased two basis points to 126 and the subordinated index fell three to 207.
A basis point on a credit-default swap protecting 10 million euros 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.
To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net