McDonald’s Euro Bonds Fueling U.S. Sales Surge to Five-Year High

McDonald’s Corp. is marketing bonds in euros as U.S. companies raise debt in the currency at the fastest pace since 2008.

The world’s largest restaurant chain is selling 350 million euros ($481 million) of 12-year securities, according to a person familiar with the matter. It’s now 1.2 percentage points cheaper for investment-grade companies to borrow in euros instead of dollars, 0.16 percentage points from the biggest discount in five years, Bank of America Merrill Lynch index data show.

The sale from McDonald’s will lift European issuance from U.S. companies including Microsoft Corp. and Mondelez International Inc. to 46.3 billion euros this year from 20 billion euros in 2012, according to data compiled by Bloomberg. Borrowers are seeking to lock in low funding costs after Federal Reserve Bank of Dallas President Richard Fisher said yesterday the U.S. central bank should begin tapering stimulus “as soon as possible.”

“Companies must be thinking let’s get these deals done now given that borrowing costs are historically low,” said Suki Mann, a strategist at Societe Generale SA in London. “And they’re feeding an investor base in Europe willing to take paper down from blue chip U.S. corporates.”

U.S. issuers sold 7.2 billion euros of notes this month in the busiest period since May 2009, according to data compiled by Bloomberg.

Currency Swap

The cost to exchange euros into dollars with five-year cross-currency basis swaps dropped to a five-year low of 11.3 basis points below the euro interbank offered rate on Oct. 30, Bloomberg data show. The price is now 14 basis points below the benchmark compared with an average 42 basis points in 2012.

The notes from McDonald’s will be priced to yield 65 basis points more than the benchmark mid-swap rate, according to the person with knowledge of the deal, who asked not to be identified before the transaction is completed. Becca Hary, a spokeswoman for Oak Brook, Illinois-based McDonald’s, didn’t immediately respond to an e-mail seeking comment sent outside office hours.

McDonald’s last sold euro-denominated debt in May, when it raised 350 million euros from 10-year notes yielding 48 basis points more than swaps, Bloomberg data show.

Another U.S. company in the market is Huntsman Corp. The Salt Lake City-based chemical maker is meeting investors today to market 200 million euros of seven-year notes to repay part of its term loan C, according to a person familiar with the matter. The company, rated Ba3 or three levels below investment grade at Moody’s Investors Service, raised the $500 million credit line in June 2009, data compiled by Bloomberg show. Huntsman last sold euro-denominated bonds in 2007, the data show.

The average yield investors demand to hold high-yield notes in euros fell to 5 percent, approaching an all-time low of 4.93 percent reached on Nov. 29, Bank of America Merrill Lynch index data show.

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