-- EDP is first Portuguese company to raise funds in bond market
in more than 18 months
-- Big success with up to EUR7.5 billion orders from investors
for EUR750 million deal
-- Companies from weaker European economies tentatively
readmitted to credit markets
By Serena Ruffoni
Portuguese utility Energias de Portugal (EDP.LB), or EDP,
received blowout demand for its bond offering Friday, in a deal
that marks the first foray into the bond market by this country's
companies in 18 months.
The 750 million euro ($970 million) issue drew some EUR7.5
billion of orders from 475 investors, bankers involved in the deal
said. While the deal was initially expected to yield around 6.25%,
the strength of demand squashed that return to 5.875%. The deal
will be priced and sold later Friday.
The strength of demand on the deal acts as further evidence that
the European Central Bank's plan to help trim borrowing costs for
weaker euro-zone states has soothed investors' nerves and helped
companies in bailed-out countries to fund themselves at affordable
levels.
Portuguese companies have been shut out of the bond market since
February 2011, when the country's public debt problems bit hard on
its government bonds. The country was bailed out in May of that
year.
"Everybody who can buy into EDP's bond is now buying it, after a
year in which everybody hated it because of Portugal's economic and
debt problems," said Tatjana Greil-Castro, fund manager at Muzinich
& Co in London, which has $17 billion under management.
"It's very important for Portuguese companies to show they can
freely fund themselves, and just like Spain's Telefonica bond issue
last week, it's a big step in the direction of normalizing credit
markets," she added.
Ratings on EDP's bond are Ba1 from Moody's Investors Service
Inc., BB+ from Standard & Poor's Corp. and BBB- from Fitch
Ratings.
Barclays PLC, BNP Paribas SA, Credit Suisse AG, ING, Mizuho
Financial Group Inc., Societe Generale SA, Banco Espirito Santo SA
and Millennium BCP are the banks handling the deal.
The resurgence in interest for Portuguese corporate debt is in
line with a brighter tone across Europe's credit markets as a
whole, where the cost to investors for insuring against company or
government debt defaults has fallen sharply.
The iTraxx Europe Crossover index, which tracks debt-insurance
costs for 40 mostly sub-investment-grade European corporate
borrowers, was 41 basis points tighter Friday at 455 basis points,
representing the cheapest debt-insurance costs since the start of
August last year.
Italian government debt insurance costs briefly fell to their
lowest in 14 months in early trading Friday, clipping 300--a level
under which it hasn't closed since July last year. Italy's CDS are
now trading around 311 basis points, six basis points tighter on
the day, Markit says. That means it now costs $311,000 a year to
insure a nominal $10 million in five-year Italian debt against
default.
(Ben Edwards in London contributed to this article.)
Write to Serena Ruffoni at serena.ruffoni@dowjones.com
