Euro Junk-Bond Market Stirs With Biggest U.S. Deal This Year

Updated on
  • ContourGlobal heads flurry of sales following issuance lull
  • Companies lured by borrowing costs at lowest in 11 months

ContourGlobal LP is marketing the biggest euro-denominated junk-bond deal by a U.S. company in 2016 as borrowers take advantage of funding costs at the lowest in almost a year.

The power generator plans to sell 550 million euros ($624 million) of notes due in 2021, it said in a statement Monday. Braas Monier Building Group SA, a supplier of roofing materials to the construction industry, separately said it is seeking to sell 435 million euros of bonds due 2021.

Eircom and Outokumpu Oyj are also in the market, signaling the tide may be turning for Europe’s high-yield market. Issuance has dropped 48 percent this year amid a commodities slump, oil-price volatility and uncertainty over the U.K.’s future in the European Union. Sub-investment grade issuers are now benefiting from the European Central Bank’s plan to buy highly rated corporate bonds, as plunging yields spur investors to seek out riskier assets.

“It’s a very good time to be issuing bonds in the European high-yield market,” said Steven Logan, the London-based head of European high yield at Aberdeen Asset Management, which manages 293 billion pounds ($422 billion). “Without a shadow of a doubt, the ECB is helping sentiment and indirectly helping European high-yield.”

Repay Debt

ContourGlobal said it will use part of the proceeds of its bond sale to repay notes maturing in 2019. The company has $500 million of debt due in June 2019, according to data compiled by Bloomberg.

Braas Monier, which is based in Luxembourg, is selling bonds because of “a positive market environment” that has “improved due to the ECB policy,” said Achim Schreck, director for communications and investor relations.

The ECB is set to start corporate bond purchases on Wednesday, marking the latest phase in policy makers’ efforts to boost growth and lending in the region. That’s helped drive average yields on junk-rated euro bonds down to 4.7 percent, the lowest since July, according to Bank of America Merrill Lynch Index data. Yields on similarly rated dollar debt are at 7.7 percent.

Irish phone services provider Eircom is offering 350 million euros of notes due 2022 to repay the same amount of existing notes maturing in 2020, according to a company statement. Outokumpu, an Espoo, Finland-based manufacturer of stainless steel, is marketing about 200 million euros of five-year bonds, according to a person familiar with the matter, who is not authorized to speak publicly and asked not to be identified.