By Caroline Hyde and Sonja Cheung June 3 (Bloomberg) — Europe’s corporate bond market is re- opening with Air Liquide SA , the world’s biggest producer of industrial gases, and German railway Deutsche Bahn AG offering the first benchmark deals since April. Air Liquide in Paris is selling 500 million euros ($612 million) of 10-year notes yielding 90 basis points more than the benchmark swap rate, tighter than the 100 basis-point spread first offered to investors, said a banker involved in the deal. Deutsche Bahn raised 500 million euros yesterday from notes due in 2020 without offering a yield premium to its existing debt. “Air Liquide and Deutsche Bahn are the first benchmark corporate bonds in a month, and will likely reopen the market for other issuers,” said Maureen Schuller , a credit strategist at ING Groep NV in Amsterdam. “These are two solid names from the core countries, which is what investors are looking for.” Bond sales slumped 70 percent in May from the previous month to 13.7 billion euros amid investor concern Europe’s deficit crisis will hurt economic growth, making it harder for companies to repay debt. Air Liquide and Deutsche Bahn’s notes are the first non-financial issues since French retailer Casino Guichard-Perrachon SA and Aeroports de Paris sold benchmark bonds on May 5, according to data compiled by Bloomberg. The extra yield investors demand to hold company bonds instead of government debt jumped to a nine-month high of 209 basis points on May 25, according to Bank of America Merrill Lynch’s EMU Corporate Bonds Index. The spread is now 205, the index shows. A basis point is 0.01 percentage point. Default Swaps The cost of insuring company debt in the market for credit- default swaps fell today with contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield ratings declining 21.5 basis points to 554.5, according to JPMorgan Chase & Co. State-owned Deutsche Bahn priced its notes at a spread of 60 basis points over swaps. The Berlin-based rail firm is rated Aa1 by Moody’s Investors Service, the second-highest grade, and a level lower by Standard & Poor’s. Deutsche Bahn’s deal shows investors “want to see investment opportunities on the primary market, even if the overall return on offer is limited,” said Markus Steilen , a syndicate manager at Commerzbank in Frankfurt, which was one of the banks managing the rail company’s issue. Air Liquide’s note sale is part of an exchange and tender offer for its 6.125 percent 2012 bonds, according to a May 26 statement. The company is rated A by S&P, the fifth-lowest investment-grade ranking. French railroad operator Reseau Ferre de France also sold new bonds by adding 250 million euros to its 4.5 percent January 2024 notes, according to Bloomberg data. The additional bonds yield 29 basis points more than the swap rate. To contact the reporters on this story: Caroline Hyde in London chyde3@bloomberg.net ; Sonja Cheung in London at scheung58@bloomberg.net
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Air Liquide, Deutsche Bahn Lead in Revival of Europe Corporate Bond Sales
