Europe's Junk Market Reopens as Faurecia, Sappi Ready Salesby
Companies test market after ECB expanded easing last week
Junk-bond issuance has tumbled 80% this year in Europe
Faurecia SA and Sappi Ltd. are planning to issue junk bonds in Europe, after credit risk dropped to the lowest in about three months.
Auto-parts maker Faurecia intends to sell 500 million euros ($555 million) of seven-year senior notes, it said in a statement. That will be the biggest refinancing in the euro junk-bond market this year, according to data compiled by Bloomberg. Papermaker Sappi plans to sell 350 million euros of seven-year bonds through a European unit.
Further European Central Bank easing is helping revive the region’s junk-bond market after an 80 percent slump in sales this year. Dutch auto-financing company LeasePlan Corp. raised 1.25 billion euros on Thursday, in the region’s biggest junk-bond sale of 2016, as lower ECB rates outweigh investor concerns about global economic growth.
The euro debt market is “definitely in a better new-issue tone this morning,” said Pierre Benigiul, a fixed-income investor at TwentyFour Asset Management, which oversees 5.5 billion pounds ($7.9 billion) of assets. “The ECB move last week had a positive impact on investor appetite.”
UBS, Dry Mix
UBS Group AG was also holding Europe’s first sale of the riskiest type of bank debt in about two months, and construction chemicals maker, Dry Mix Solutions Investissements SAS, was marketing 150 million euros of seven-year notes, according to separate people familiar with the sales, who asked not to identified because they aren’t authorized to reveal the information.
The Markit iTraxx Europe Crossover Index of credit-default swaps on sub-investment grade European corporate debt held near the lowest since Dec. 9.
Faurecia will use funds raised in its debt sale to redeem 490 million euros of notes maturing in December. The company, based in Nanterre, France, is rated Ba3, three levels below investment grade, by Moody’s Investors Service.
Sappi, based in Johannesburg, will use its bonds to refinance $350 million of notes maturing in 2021, it said in a statement. The new issue is expected to be rated Ba2 by Moody’s, the second-highest junk rating, according to a person familiar with the sale. A spokesman for the company declined to comment on the bond sale.
Dry Mix, which is based in Issy-les-Moulineaux, France, will use the proceeds from it bond sale to repay shareholder loans, the person familiar with the plan said. Moody’s will probably rate the notes B1, four grades below investment level, the person said. The company last sold bonds in 2014, when it issued 550 million euros of floating rates notes maturing in June 2021, according to data compiled by Bloomberg.
The construction-chemical maker is owned by funds advised by private equity firm CVC Capital Partners. A spokeswoman for CVC declined to comment on the sale of senior secured floating rate notes when contacted by phone.