Spain’s Grupo Isolux Markets Bonds as Junk Yields Drop to RecordKatie Linsell
Grupo Isolux Corsan SA, a Spanish engineering company, is meeting investors to market its first bonds in euros after borrowing costs for speculative-grade companies fell to a record in Europe.
Grupo Isolux is planning to sell 400 million euros ($555 million) of high-yield notes maturing in seven years, according to a person familiar with the matter. The average yield investors demand to hold junk-rated securities in euros dropped five basis points last week to 4.4 percent, Bank of America Merrill Lynch index data show.
Investors are seeking riskier debt as central banks hold interest rates at record lows and with Standard & Poor’s predicting the European corporate default rate to decline to 5.2 percent by next year from 5.9 percent at the end of 2013. Non-financial companies sold 2 billion euros of speculative-grade notes last week, the busiest period since the week ending Jan. 17, according to data compiled by Bloomberg.
“Yields are very attractive for issuers at the moment, but if you’re selective there is still value for the investor in the high-yield space,” said Roman Gaiser, who oversees 4 billion euros of bonds as head of high yield at Pictet Asset Management SA in Geneva. “The environment of low interest rates may be very prolonged so appetite for high yield should continue.”
The cost of insuring the debt against losses dropped to the lowest since July 2007, with the Markit iTraxx Crossover Index of credit-default swaps on 50 European companies with mostly speculative-grade ratings falling two basis points to 257 basis points at 10:30 a.m. in London.
Madrid-based Grupo Isolux will use the proceeds from its bond issue to refinance existing debt, said the person, who asked not to be identified because they’re not authorized to speak about the sale.
Energie Baden-Wuerttemberg AG, Germany’s third-largest electricity supplier, has hired banks to market hybrid bonds in euros, according to a person with knowledge of the matter. It would be Karlsruhe-based EnBW’s first sale of the notes that combine elements of debt and equity, data compiled by Bloomberg show.
Germany’s state-owned railway, Deutsche Bahn AG, is selling 500 million euros of bonds through its Deutsche Bahn Finance BV unit, another person said. The notes, to be rated Aa1 by Moody’s Investors Service, will mature in March 2029.