EDF’s Borrowing Exceeds $12 Billion This Week With 100-Year BondKatie Linsell
Electricite de France SA has capped a $12.4 billion global fundraising this week by selling the first 100-year bonds in Europe in almost three years.
The world’s biggest operator of nuclear reactors priced 1.35 billion pounds ($2.2 billion) of notes to yield 6.125 percent after issuing $700 million of bonds with the same maturity on Jan. 13. The Paris-based utility is the second company to sell century bonds in Europe that aren’t hybrids, following GDF Suez SA in March 2011, according to data compiled by Bloomberg.
Pension funds and insurance companies like to buy long-dated securities to match their liabilities while utilities can align the debt with their industrial assets. EDF is offering the debt as the average yield on pound-denominated bonds with maturities of more than 15 years fell to 4.59 percent, the lowest since Nov. 7, according to Bank of America Merrill Lynch index data.
“Times come round when 100-year bonds make sense because that’s what investors want to buy,” said Bill Blain, a strategist at Mint Partners Ltd. in London. “People are looking for long-dated assets because the repayments that are made over the life of the bond help match the buyer’s liabilities.”
As part of its fundraising this week, EDF issued $5.4 billion of hybrid notes in dollars, euros and pounds, one year after selling $8.5 billion of the securities combining elements of debt and equity, according to data compiled by Bloomberg. The company’s 100-year notes in dollars have a coupon of six percent, the data show.
EDF made the most of “very good market conditions in the U.S. and Europe,” said a spokeswoman for EDF in Paris, who asked not to be named citing company policy. The bond sales helped EDF extend the maturity of its debt and diversify its investor base, she said.
Today’s sterling-denominated bond extends the average maturity of EDF’s debt by 3.4 years, the company later said in a statement.
The cost of insuring corporate bonds against losses is holding near the lowest in four years in Europe. The Markit iTraxx Europe index of credit-default swaps on 125 companies with investment-grade ratings dropped to a four-year low of 69 basis points this month and was at 71 basis points at 4:01 p.m. in London.
The Markit iTraxx Crossover Index of 50 companies with mostly speculative-grade ratings fell 1.3 basis points today to 278 basis points, approaching the lowest since October 2007.