Heathrow Sells Pound Bonds as Yields Decline to Four-Month Low

Heathrow Airport Holdings Ltd. issued pound-denominated bonds as borrowing costs for investment-grade companies fell to the lowest in more than four months in the U.K.

The owner of Europe’s busiest hub sold 750 million pounds ($1.2 billion) of 33-year notes yielding 117 basis points more than U.K. government debt through its Heathrow Funding Ltd. unit, according to a person familiar with the matter. The average yield on sterling corporate bonds fell 3 basis points to 3.53 percent, the lowest since June 17, Bloomberg bond index data show.

“Supply in investment grade is shrinking and that is supportive for yields and spreads,” said John Pattullo, who manages the equivalent of about $4.7 billion as head of retail credit at Henderson Global Investors in London.

Non-financial companies in the U.K. issued 550 million pounds ($891 million) of high-grade bonds so far this month compared with 4.2 billion pounds for all of September and a monthly average of 2 billion pounds this year, according to data compiled by Bloomberg. That’s pushed the premium investors demand to hold the securities instead of government debt down to 156 basis points, the lowest since November 2007, according to Bank of America Merrill Lynch index data.

“Today’s bond issuance in the sterling market is part of Heathrow’s regular financing activities and the proceeds from the issue will be used to refinance existing debt,” said Andrew Efiong, Heathrow’s Director of Treasury.

Three-Part Sale

In the high-yield sterling market today, Domestic & General Group Ltd. sold a total 500 million pounds of notes in three parts to finance its buyout by CVC Capital Partners Ltd., according to a person with knowledge of the transaction.

The Bedworth, U.K.-based product warranty provider marketed 175 million pounds of floating-rate notes due 2019 yielding 500 basis points more than the London interbank offered rate, 200 million pounds of senior secured bonds due 2020 yielding 6.375 percent, and 125 million pounds of securities maturing in 2021 to yield 7.875 percent, said the person, who asked not to be identified because they’re not authorized to speak about it.

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