Vodafone Sells 6 Billion Euros of Bonds as Credit Risk AbatesBy
Vodafone Group Plc sold 6 billion euros ($6.6 billion) of securities, the biggest corporate bond sale in the single currency this year, as signs of risk in the region’s credit markets ease.
The mobile-phone carrier placed notes with maturities ranging from three years to 10 1/2 years, according to data compiled by Bloomberg. The four-part deal included fixed- and floating-rate bonds and included a change-of-control clause that protects bondholders, the data show.
Investor demand for corporate debt is returning after a global rout all but closed credit markets earlier this month. The cost of insuring bonds in Europe fell on Monday, extending last week’s decline, according to data compiled by Bloomberg. The average yield investors demand to hold notes sold by investment-grade companies dropped seven basis points last week to 1.33 percent, according to Bank of America Merrill Lynch index data.
“It’s been seriously tumultuous,” said Geraud Charpin, a portfolio manager at BlueBay Asset Management in London, which oversees $58 billion. “The change-of-control clause will reassure investors who thought the company could be bought by a lower-rated player.”
The reprieve may be temporary, he said. It may prove a prelude to renewed volatility, according to Mohamed El-Erian, a Bloomberg View columnist and chief economic adviser at Allianz SE.
Officials at Vodafone, based in Newbury, England, declined to comment on the sale. The company sold about 2.9 billion pounds ($4.1 billion) of convertible bonds last week.
Monday’s deal included 1.75 billion euros of three-year, floating-rate notes that will yield 95 basis points above the three-month euro interbank offered rate, or Euribor, according to the data. It also included 1.25 billion euros of bonds maturing in 2021 that will pay 123 basis points above benchmark rates; 1.25 billion euros of notes due in 2023 that will pay 148 basis points more than benchmarks; and 1.75 billion euros of bonds due 2026 that will pay 172 basis points more, the data show.
Investors demand an average premium of 158 basis points to hold euro-denominated investment-grade debt, Bank of America Merrill Lynch index data show.
Vodafone will use proceeds from the bond sale for general corporate purposes. Last week, it agreed to combine its Dutch business with that of Liberty Global Plc, paying about 1 billion euros in cash. European carriers are striking combinations to seek savings and add products as consumers increasingly buy TV, wireless and broadband from a single provider.
The carrier shelved plans last year to sell as much as $2 billion of bonds after investors demanded sweetened terms, including provisions that would have protected them against losses if the company were taken over.
“This is an indication markets are in somewhat calmer waters,” said Jeroen van den Broek, head of developed-markets credit strategy and research at ING Bank NV in Amsterdam.
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