Photographer: Balint Porneczi/Bloomberg

Berkshire to Ferrari Market Euro Bonds as Issues Rebound

  • Buffett follows up company-record debt sale with euro offering
  • Pemex also selling euro bonds as borrowing costs decline

Warren Buffett’s Berkshire Hathaway Inc. and Ferrari NV led companies with euro-denominated bond sales, as a revival in single-currency debt sales gathers steam.

Berkshire sold 2.75 billion euros ($3 billion) of notes maturing in four years, eight years and 12 years, according to data compiled by Bloomberg. The offer comes a day after Berkshire sold a company-record $9 billion of debt to help repay loans used in the acquisition of Precision Castparts Corp.

Ferrari and Petroleos Mexicanos also sold euro bonds as issuers flock back to the market because of a decline in borrowing costs caused by expectations for further European Central Bank easing. Highly rated companies have sold more than 38 billion euros of notes already this month, surpassing half of January’s 63 billion-euro total, according to data compiled by Bloomberg.

“New issuance has started to pick up, but the market environment remains quite volatile,” said Chris Bowie, a money manager at Twentyfour Asset Management in London, which oversees about 5.5 billion pounds ($7.8 billion). 

Berkshire Offering

Berkshire narrowed spreads in its sale. It sold 1 billion euros of four-year bonds to yield 60 basis points above benchmark rates, after initially marketing them to yield 85 basis points more, according to a person familiar with the matter who asked not to be identified because they’re not authorized to speak publicly. The premium on 1 billion euros of eight-year notes dropped to 95 basis points from an initial 120 basis points. Berkshire also sold 750 million euros of 12-year securities at 140 basis points, compared with an initial offer of 165 basis points, the person said. 

Investors demand an average 114 basis points above benchmark rates to hold highly rated debt, according to Bank of America Merrill Lynch Index data.

Berkshire, based in Omaha, Nebraska, was able to tighten yields in Tuesday’s seven-part debt sale because of investor demand. The longest part was $2.5 billion of 3.125 percent of 10-year bonds yielding 1.3 percentage points more than similar-maturity Treasuries, according to Bloomberg data. That was down from an initial offer of 1.55 percentage points.

Ferrari, Pemex

Ferrari, the supercar maker formerly part of Fiat Chrysler Automobiles NV, sold 500 million euros of unrated seven-year bonds at 140 basis points above benchmark rates, Bloomberg data show. Mexican oil company Pemex sold 2.25 billion euros of three-year and seven-year notes, according to the data.

E-mails to officials at Berkshire and Pemex seeking comment on the bond sales weren’t immediately answered. Officials at Ferrari, based in Maranello, Italy, declined to comment on the bond offering.

Berkshire last sold bonds in euros a year ago, based on data compiled by Bloomberg. Yields on the 3 billion euros of notes, sold in three parts, have widened since then, in line with most other investment-grade notes sold at the time. The 750 million euros of 2023 notes are quoted at about 90 basis points above benchmark rates, after pricing at 27 basis points above, according to data compiled by Bloomberg.

Buffett has said that Berkshire used about $23 billion of cash toward the Precision Castparts purchase, which was valued at about $37 billion. He planned to borrow the rest. The billionaire has used cash generated by insurance units to grow Berkshire through acquisitions including companies making underwear, ice cream and batteries. The company’s cashpile had surpassed $70 billion as of Dec. 31.

Average yields on euro-denominated investment grade debt have narrowed to 1.23 percent from 1.58 percent in late September, according to Bank of America Merrill Lynch index data.

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