Busy week for junk bonds in Europe
December 6, 2004
Amsterdam - World Directories, a Dutch telephone listings company, and Peri, a German construction firm, led the busiest week in 10 for junk bond sales in Europe last week, as borrowing costs for high-risk, high-yield companies fell to the lowest in seven years.
World Directories and Peri were among four issuers to raise €880 million (R6.8 billion) of junk-rated bonds, the most since the week of September 20, according to data compiled by Bloomberg.
The two other junk-rated sales came from Chesapeake, a US maker of packaging and labels, which raised €100 million in a sale of 10-year bonds, and Huntsman International, a unit of the world's biggest privately owned chemical producer, which raised €135 million in a sale of bonds due in 2015.
Junk bonds are those rated Ba1 and lower by Moody's Investors Service and BB+ and lower by Standard & Poor's.
Average yields on the riskiest debt slumped to 6.1 percent on Friday, the lowest ever for Merrill Lynch's seven-year-old euro high-yield constrained index, which includes 175 bonds with a face value of $51 billion.
Guillaume Bucaille of Pictet Asset Management, who bought all four bonds, said: "We have been receiving a lot of new cash from investors searching for yield and have to put this to work."
On November 30, World Directories raised €395 million in a sale of 10-year bonds to help finance its $2.1 billion takeover by Apax Partners Worldwide and Cinven from VNU.
The euro-denominated securities are rated Caa1 by Moody's, seven steps below investment grade, and an equivalent CCC+ from S&P. They were priced to yield 8.5 percent, at the lowest end of the 8.5 percent to 8.75 percent range offered to investors.
Credit Suisse First Boston, Goldman Sachs Group, JP Morgan Chase and Bank of America, which managed the sale, received about €1.6 billion of orders for the debt, said a banker familiar with the deal.
On December 3, Peri boosted a two-part sale of fixed- and floating-rate notes to €350 million from €225 million, said Leonie Padioleau, a capital markets official at Goldman Sachs in London, which managed the sale with Deutsche Bank.
"The levels of oversubscription enabled us to price both tranches at the tight end of price talk," Padioleau said.
The pricing "represents the lowest coupon and lowest spread in the history of the European high-yield market".
The seven-year fixed-rate securities yielded 5.625 percent, at the lowest end of the 5.625 percent to 5.875 percent range offered to investors.
The five-year floating-rate notes were priced to yield 175 basis points more than the six-month euro interbank offered rate, at the bottom of the range between 175 basis points and 200 basis points proposed earlier. - Bloomberg
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