Riskier Issuers Enter Euro Bond Market as Corral Seeks Sale

  • Offerings come amid deepest slump in junk issuance since 2012
  • Sales include the first PIK toggle note since November

Europe’s junk-bond issuance may be stirring back to life after the biggest slump in four years.

Corral Petroleum Holdings AB, the owner of Sweden’s biggest oil refiner Preem AB, said it’s offering the equivalent of $700 million of five-year notes in euros and dollars that can pay interest in cash or debt. It will be the first sale of so-called pay-in-kind toggle bonds since November.

Spain’s Cirsa Gaming Corp. also expanded a speculative-grade bond sale as European Central Bank easing starts to draw investors into high-yield funds. Junk-bond issuance has fallen to 10 billion euros ($11 billion) this year from 28 billion euros a year earlier amid volatility in commodity and equity markets and uncertainty over the U.K.’s future in the European Union.

“Flows have been positive into the euro high-yield asset class, so there is cash to deploy,” said Philipp Buff, a Geneva-based senior credit analyst at Pictet Asset Management, which oversees about 139 billion euros of assets.

Proceeds of the Corral sale will be used to repay $613 million of outstanding euro- and dollar-denominated debt maturing in 2017, the company said in a statement.

PIK Sales

Private-equity companies led by Advent International Corp. and Bain Capital LLC sold 1.1 billion euros of senior secured fixed-rated and floating-rate PIK toggle notes maturing in 2021 on Nov. 11 to help finance the purchase of Italian banking-services provider ICBPI, according to data compiled by Bloomberg.

The first euro PIK securities, which typically carry a higher coupon than conventional bonds to compensate for provisions that allow issuers to pay interest in cash or debt, were sold in 2003, the data show. 

High-yield bond funds in Europe attracted $898 million in the week ended April 13, lifting the total this year to $4.6 billion, according to Bank of America Merrill Lynch, citing EPFR Global data. The average yield on junk notes in euros fell to 4.92 percent, the lowest since August, from an almost four-year high of 6.55 percent on Jan. 20, according to Bank of America Merrill Lynch index data.

Cirsa Gaming sold 450 million euros ($510 million) of May 2021 notes, according to data compiled by Bloomberg, after raising the offering from an initial 300 million euros. Proceeds of the sale will be used to repay outstanding debt, Chief Financial Officer David Royo said in an e-mail to Bloomberg.

Cirsa’s offering comes a day after Moody’s Investors Service upgraded the company’s rating, citing “successful efforts” to cut debt.

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