Junk Bond Yields Fall to Record as Schaeffler Leads Weekly SalesKatie Linsell
Schaeffler AG, the privately-owned German bearing maker, led 805 million euros ($1.1 billion) of high-yield bond sales in Europe this week as borrowing costs fell to a record.
The biggest investor in car-parts producer Continental AG, sold 600 million euros of five-year bonds to yield 4.25 percent, according to data compiled by Bloomberg. Issuance was below the 1.4 billion-euro weekly average for the year for the fifth consecutive week, the data show.
Non-financial companies have issued a record 24.7 billion euros of junk bonds in Europe this year, as average yields on the debt fell to a low of 5.24 percent, according to Bloomberg data and Bank of America Merrill Lynch indexes. Investors poured $597 million into high-yield bond portfolios in the week ending April 17 while pulling $825 million from equity funds, Bank of America reported, citing EPFR data.
“The cash market rally has continued this week with ongoing demand for high-yield products even at these tighter levels,” said Peter Din, a London-based credit strategist at Mizuho International Plc. “I would expect to see steady supply of new issues from now until the summer.”
British car retailer Pendragon Plc, the only other non-financial company that sold high-yield debt this week, raised 175 million pounds ($270 million) in its first sale. It issued seven-year senior secured bonds, Bloomberg data show.
High-yield, or speculative-grade, bonds are rated below Baa3 by Moody’s Investors Service and lower than BBB- at Standard & Poor’s.
Average yields on junk-rated pound-denominated bonds dropped to a low of 6.15 percent yesterday, Bank of America index data show. Nottingham, U.K.-based Pendragon priced the bonds to yield 6.875 percent, lower than its initially marketed range of 7 percent to 7.25 percent, according to people familiar with the deal.
Schaeffler, which also sold $850 million of eight-year notes, increased the size of its two-part bond sale from an expected equivalent of 1 billion euros to 1.25 billion euros due to “extraordinary demand,” the Herzogenaurach, Germany-based company said in an April 23 statement. Investors offered “several times” more than the amount of bonds available, according to the statement.
New Look Group Retail Ltd., a U.K. fashion retailer, is among companies planning to sell bonds in coming weeks, according to a company statement today. The issuer is meeting European and U.S. investors from April 29 to May 2 to sell the equivalent of 800 million pounds ($1.2 billion) of notes in euros, pounds and dollars, according to people familiar with the plan, who asked not to be identified because the details are private.