Rexel Plans $1.1 Billion Junk Bond Sale, Gets $1.4 Billion Loan

Rexel SA, the French electrical equipment distributor, plans to raise about $1.1 billion of bonds.

The company is selling 500 million euros ($640 million) and $500 million of notes to mature in 2020 to replace its 8.25 percent bonds maturing in 2016, according to a statement from the Paris-based company. The company also raised a 1.1 billion-euro five-year credit line from a group of 16 banks, the lenders said in an e-mailed statement today.

Rexel joins Dutch cable television operator Ziggo NV in marketing notes and raising loans after a proposed levy on bank deposits in Cyprus prompted Moody’s Investors Service to warn that policy makers are willing to disrupt markets to avoid sovereign defaults and preserve the euro. The companies are both rated BB by Standard & Poor’s, two levels below investment grade.

“BB rated issuers that can show they are less cyclical, and can allay investors’ fears over Eurozone uncertainty, are more likely to get deals done,” Andrew Sheets, head of European Credit at Morgan Stanley in London, said in a telephone interview. “Despite the macro-economic backdrop being weak, there’s pretty high demand for good quality high-yield paper.”

The Markit iTraxx Financial Index of credit-default swaps insuring senior debt of 25 banks and insurers rose as much as 19 basis points to 162 basis points yesterday, according to prices compiled by Bloomberg. That’s the biggest jump since Aug. 2, before the European Central Bank steadied markets by announcing its bond-buying program, and the gauge is now at the highest in almost three weeks.

Bond Prices

Bonds of companies rated BB in Europe offer yields of about 4.3 percent, higher than the record low of about 4 percent reached Jan. 14, and in line with the start of the year, according to Bank of America Merrill Lynch’s Euro High Yield Non-Financial Constrained Index.

“The fact that Ziggo announced both loans and bonds suggests that it aims to maintain a balanced access to both capital markets, which is sensible in light of overheated bond technicals and improving demand for loans,” said Jean-Philippe Maltais, a London-based credit analyst at Lucror Analytics, in a note.

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