Mondelez Follows Microsoft Selling Bonds in Europe as Costs Fall
December 4, 2013 Leave a comment
Mondelez Follows Microsoft Selling Bonds in Europe as Costs Fall
U.S. food and beverage company Mondelez International Inc. (MDLZ) is following Microsoft Corp. selling bonds in Europe as borrowing costs fall. The maker of Oreo cookies is marketing 18-month floating-rate notes and fixed-rate bonds due January 2017 and January 2021, according to a person familiar with the matter. The average yield investors demand to hold corporate bonds in euros instead of government debt dropped six basis points this week to 123 basis points, the lowest since June 12, Bank of America Merrill Lynch index data show.American companies are raising funds in the common currency at the fastest pace since 2008, with Microsoft’s 3.5 billion-euro ($4.8 billion) issue yesterday boosting the total for the year to 44 billion euros, according to data compiled by Bloomberg. Borrowers are speculating the European Central Bank will hold benchmark rates at record lows as a report today showed the region’s economy slowed in the third quarter.
“In Europe we’re still in an environment of easing from the central bank, whereas everyone is expecting tapering in the U.S. early next year,” said Nicolo Bocchin, a Milan-based credit portfolio manager at Aletti Gestielle SGR SpA who helps oversee about 3.5 billion euros. “U.S. companies see that there is demand in Europe so they issue here where there are lower yields.”
The average yield gap between investment-grade bonds in dollars and euros widened to 1.3 percentage points this week, near the biggest discount since Sept. 13, according to Bank of America Merrill Lynch index data. Euro-denominated notes yield an average 2 percent while securities in dollars yield 3.3 percent, the data show.
Three-Part Deal
Mondelez, based in Deerfield, Illinois, last sold bonds in euros in 2008, data compiled by Bloomberg show. The company’s floating-rate notes will be priced to yield about 50 basis points to 55 basis points more than the three-month euro interbank offered rate, according to the person, who asked not to be identified before the transaction is completed.
The bonds due 2017 will be priced to yield about 60 basis points more than the benchmark mid-swap rate, while the securities maturing in 2021 are being offered at a spread of about 95 basis points, the person said.
The cost of insuring corporate bonds against losses was little changed, with the Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies falling 0.4 basis point to 81 basis points at 11:21 a.m. in London. The gauge dropped to a 3 1/2-year low of 77 basis points on Nov. 27.
To contact the reporter on this story: Katie Linsell in Madrid at klinsell@bloomberg.net
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