SP AusNet issues first euro bond as credit risk fallsKatie Linsell and Verity Ratcliffe
SP AusNet, an Australian electricity grid operator, and Slovakian gas utility Eustream AS marketed their first euro-denominated bonds as European credit risk fell.
SP AusNet priced 500 million euros ($652 million) of notes due July 2020 while Eustream is also planning to issue 500 million euros of seven-year notes, according to people familiar with the deals, who asked not to be identified because the details are private. The cost of insuring against losses on investment-grade debt in Europe fell as much as 5.5 basis points to 104 basis points, the lowest since May 31.
Bond markets rallied after Federal Reserve Chairman Ben S. Bernanke said yesterday U.S. monetary policy will remain “highly accommodative” for the “foreseeable future,” even as the central bank’s policy makers debate whether to scale back bond buying this year. The European Central Bank and the Bank of England both indicated last week they will continue stimulus measures.
“Today the market is clearly better than last month after Bernanke’s comments yesterday,” said Rik Den Hartog, portfolio manager at Kempen Capital Management in Amsterdam. “Sentiment started to turn after the Bank of England and the ECB issued more dovish comments, and interest rates started to stabilize.”
SP AusNet’s bonds were priced to yield 95 basis points more than the mid-swap rate while Eustream’s notes are being marketed at a spread of 235 basis points, said people with knowledge of the sales.
“Eustream was ready to issue the bonds at the beginning of June but it was decided to wait until markets calm down after recent market volatility that was caused by statements about the tapering of quantitative easing,” said Vladimír Stehno, vice president for debt capital markets at Erste Group Bank AG in Prague, one of the underwriters on the deal. “Until now, the company has been debt-free so this bond issue serves as a means of optimizing their capital structure.”
Vahram Chuguryan, a spokesman for Eustream in Bratislava, declined to comment on the bond sale. A spokesman for Southbank, Victoria-based SP AusNet didn’t immediately respond to an e-mailed request for comment sent outside office hours.
The average yield on Germany’s benchmark 10-year bond fell five basis points to 1.62 percent at 3:07 p.m. in London, the lowest since June 19, according to Bloomberg Bond Trader prices. The yield on 10-year Treasuries fell for a fourth day to 2.58 percent.
The Markit iTraxx Europe index of credit-default swaps on 125 investment-grade companies fell 3 basis points to 107 basis points. The Markit iTraxx Crossover index of swaps on 50 speculative-grade companies dropped 11 basis points to 431.
In the high-yield market, London-based Vue Entertainment Ltd., one of Europe’s biggest cinema operators, is selling 300 million pounds ($453 million) of fixed-rate bonds and 290 million euros of floating-rate notes, according to a person familiar with the deal.
The company’s debut bonds have been assigned a provisional B2 rating by Moody’s Investors Service, five levels below investment grade.
Findus Group Ltd., the London-based frozen-food maker that restructured its debt last year, is also planning to issue its first bonds to repay credit facilities.
The company that produces Young’s Seafood brand is selling 270 to 300 million euros of five-year notes that may pay be priced to yield about 9.25 percent and 150 to 170 million pounds of five-year bonds offering about 9.5 percent, according to a person familiar with the sale. Findus canceled a proposed sale of bonds in Swedish kronor.
The securities may be rated B3 by Moody’s Investors Service and an equivalent B- by Standard & Poor’s, six levels below investment grade.