Photographer: Simon Dawson/Bloomberg

National Grid Gas Said to Market Bonds Amid Corporate Shake-Up

National Grid Gas Plc is marketing bonds to refinance older debt as its parent company readies the unit for a potential sale.  

The natural gas distributor is seeking to sell sterling bonds due between five years and 30 years, as well as euro notes with maturities of between six years and 10 years, according to a person familiar with the matter who isn’t authorized to speak publicly and asked not to be identified. The London-based parent National Grid Plc last week said it planned to buy back securities currently paying investors between 4 percent and 9 percent, and sell new notes.

National Grid intends to sell a majority stake in its gas distribution unit to cut costs and to increase its focus on faster-growing business areas. The company comes to the market after expanded Bank of England stimulus announced in the summer sent borrowing costs to record lows and spurred a surge of sterling-denominated corporate bond sales.

National Grid Gas “had to make changes to guarantors given the sale of the business so why not bring the interest expenses down too,” said Tim Barker, the London-based head of credit at Old Mutual Global Investors. “With yields at these levels, who wants to be faffing around with high coupons?”

Officials at National Grid Gas declined to comment on the planned sale. The sterling bonds could be sold as soon as Tuesday and a euro deal may follow on Wednesday, the person familiar with the matter said.

The average yield on investment-grade sterling-denominated corporate bonds fell to a record low 2.06 percent last month and was at 2.3 percent on Friday, according to Bloomberg Barclays Index data.