Hellenic Telecom Plans Lowest-Rated Peripheral Bond for 7 Years

Hellenic Telecommunications Organization SA is planning to sell the lowest-rated bonds from a company in Europe’s periphery for at least seven years.

Greece’s largest phone company, known as OTE, hired banks for an investor call today ahead of an issue of five-year bonds in euros, a person familiar with the deal said. The company’s rated Caa1 at Moody’s Investors Service, seven steps below investment grade.

OTE wants to sell debt so that it can redeem a 1.25 billion-euro ($1.7 billion) issue of notes coming due in August and 500 million euros of securities due in 2014, the person familiar with the deal said. The transaction is being marketed as the cost of insuring junk debt climbed to the highest in two weeks in the credit-default swaps market.

“Risk appetite is there, even for Greek names,” said Dimitris Dalipis, a fund manager at Alpha Trust Mutual Fund Management SA in Athens, who owns OTE bonds. “There aren’t many bonds you can find at decent yields these days, even in the corporate high-yield space.”

OTE’s proposed deal will be the lowest rated from a non-financial peripheral borrower since at least 2006, according to Bloomberg data tracking benchmark-sized issues. The company has four bonds outstanding, with one due to mature each year until 2016, Bloomberg data show.

Existing Bonds

Its 4.625 percent 2016 notes yield 492 basis points more than the benchmark midswap rate, the lowest premium since June 2011, Bloomberg data show. Its 7.25 percent 2015 bonds yield 550 basis points more than swaps, the lowest since June 2011.

“Judging from their tender price and where the bond due 2016 is trading at the moment, the spread offered will have to be quite above those to make it attractive,” said George Satlas, the Athens-based head of investments at Mutual Funds of Postal Savings Bank and Hellenic Post.

Kelda Finance, a division of Bradford-based Kelda Group Ltd., increased the size of its seven-year bond offering by 45 million pounds to 200 million pounds ($315 million), which it may price tomorrow. Infinis Group, an investment company owned by Guy Hands’s Terra Firma Capital Partners Ltd., will issue 350 million pounds ($550 million) of six-year high-yield notes after a London roadshow Jan. 31. The Northampton, England-based company is ranked B1 by Moody’s.

Cirsa Gaming

Cirsa Gaming Corp SA’s funding division Cirsa Funding Luxembourg is marketing a 100 million-euro tap of the company’s 8.75 percent notes due 2018, while the European Financial Stability Facility, the region’s temporary bailout fund, will price 5 billion euros of five-year bonds to yield 17 basis points more than the benchmark swaps rate, people with knowledge of the deals said.

In credit derivatives markets, the Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 3 basis points to 110 at 3:30 p.m. in London, the highest level this year.

The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield ratings increased 12 basis points to 434. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers added four basis points to reach 141.

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.