By Carol Dean
The European primary bond market witnessed a slew of deals
Thursday, spearheaded by a hybrid bond from Iberdrola SA (IBE.MC),
amid a broad range of bond issuance.
Spanish utility Iberdrola has launched its expected hybrid bond,
a debt instrument that combines aspects of both debt and equity.
These are attractive to companies because the equity component
strengthens their balance sheets without diluting existing
shareholders while bolstering their credit rating.
This type of debt sale is likely to be a recurring theme in debt
capital market this year, market participants said.
Telekom Austria AG (TKA.VI), Electricite de France SA (EDF.FR)
and Veolia Environnement SA (VE) have already sold hybrid bonds.
Dutch telecommunications company Koninklijke KPN NV (KPN.AE) is
also considering issuing this type of debt. However, Telecom
Italia's postponed its hybrid issue this week amid rating concerns
for the company.
Elsewhere, Swiss Re Ltd. is meeting investors for a potential
contingent capital bond transaction. Contingent capital bonds,
known as CoCos, are types of debt that convert into equity, or lose
their value, if the financial institution issuing it breaches a
predetermined level of capital. This type of security is riskier
for investors than more typical bonds but has higher returns.
German lender Commerzbank AG (CBK.XE) is seeking to sell its
first covered bond backed by loans made to small and medium-size
German companies.
Here's a rundown of how the CDS market is performing Thursday,
who's selling bonds and what's coming up:
CDS:
iTraxx Europe index: Three basis points wider at 113.59/114
basis points.
iTraxx Crossover index: 11 basis points at 443/445 basis
points.
NEW ISSUES:
Iberdrola has set pricing on its hybrid bond launched Thursday
at 6.125% to 6.25%.
Swedish engineering company Atlas Copco AB (ATCO-A.SK) has
planned a 500 million euro ($669.23 million) 10-year senior bond.
Initial price recommendations are in the range of 75 to 80 basis
points over the reference midswaps rate.
Dutch real estate investment company Corio NV (CORA.AE) has
planned a EUR500 million, eight-year senior unsecured bond. Initial
price recommendations are in range of 175 to 180 basis points over
the reference midswaps rate.
Commerzbank has priced a EUR500 million five-year covered bond
at 99.776 with a coupon of 1.50% equating to a spread of 47 basis
points over midswaps.
Danske Bank is planning to issue a seven-year covered bond
backed by Swedish and Norwegian residential mortgages. Initial
pricing is in the low to mid 30 basis points over midswaps.
Network Rail Infrastructure Finance PLC, the U.K. authority
responsible for the country's railway network, plans to increase
the size of three of its bonds, one of the banks running the tap
said Thursday. Suggested pricing on all three bonds--maturing
November 2027, 2037 and 2047--is 35 basis points over gilts.
UP AND COMING:
Swiss Re has hired banks to arrange a series of investor
meetings before launching a contingent capital bond.
Write to Carol Dean at carol.dean@dowjones.com