Schlumberger Sells Bonds in Europe as Discount to U.S. Widens
Schlumberger Ltd. (SLB), the world’s largest oilfield services provider, sold bonds in euros as the cost of borrowing in the currency relative to U.S. dollars approached the cheapest in almost five years.
Houston-based Schlumberger issued 500 million euros ($671 million) of notes due March 2019 to yield 37 basis points more than the mid-swap rate, according to data compiled by Bloomberg. The average yield difference between investment-grade bonds in euros and comparable dollar notes widened 11 basis points in the past week to 1.33 percentage points, near the biggest discount since December 2008, Bank of America Merrill Lynch indexes show.
Schlumberger’s deal adds to 3.75 billion euros of bonds sold by U.S. companies last week, the busiest period since May 2009, according to data compiled by Bloomberg. Borrowing costs between the U.S. and Europe may diverge further after Federal Reserve Bank of Atlanta President Dennis Lockhart said yesterday a reduction of U.S. bond purchases “could very well take place” next month.
“Where there are indications tapering might begin sooner than expected then that will tend to drive a greater wedge between yields in the two markets,” said Andrew Sheets, the head of European credit research at Morgan Stanley in London. “If an issuer is focused on getting the lowest possible yield that will make the European market more attractive.”
Ariane Labadens, a spokeswoman for Schlumberger in Paris, declined to comment on the bond sale.
Another American borrower in the European market today was Hertz Global Holdings Inc. (HTZ) The Park Ridge, New Jersey-based car rental company sold 425 million euros of five-year securities yielding 4.375 percent, according to data compiled by Bloomberg. The bonds are rated B2 by Moody’s Investors Service, five levels below investment grade.
Borrowing costs for junk-rated companies are also lower in Europe compared to the U.S., with the yield difference widening to 1.44 percentage points, the biggest gap since April 2006, according to Bank of America Merrill Lynch indexes.
Dover Corporation, a manufacturer of industrial products and equipment based in Downers Grove, Illinois, hired banks to arrange investor meetings in Europe starting Nov. 18, according to a person familiar with the matter. A euro-denominated deal would be the first for the company, data compiled by Bloomberg show.
Petroleos Mexicanos, Mexico’s state energy company, is also meeting bond investors in Europe next week, another person said. It would be the first euro-denominated bond sale since 2009 for the Mexico City-based utility, which typically issues in U.S. dollars, according to Bloomberg data.
Also in credit markets today, WPP Plc, (WPP) the world’s biggest advertising company, sold 750 million euros of 10-year notes yielding 103 basis points more than the mid-swap rate, according to data compiled by Bloomberg. It was the London-based company’s first bond sale in the currency since April 2008, the data show.
The average yield investors demand to hold investment-grade notes in euros held at 1.9 percent compared with an average in the last five years of 2.9 percent, Bloomberg bond index data show.
In the sterling market, DirecTV (DTV), the biggest U.S. satellite television provider, is selling 20-year bonds in pounds to yield about 185 basis points more than U.K. government debt, according to a person with knowledge of the deal.
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