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Italian designer eyewear company Luxottica Group SpA (LUX) sold its first bond in 16-months Monday, with investor demand reaching EUR9 billion, according to one of the banks running the deal.
More than 500 investors bid for the Italian company's debt, with the EUR500 million, seven-year bond pricing at 185 basis points over midswaps, 15 basis points tighter than initial guidance.
This compares with a similar seven-year deal by Italian road-toll operator Atlantia SpA (ATL.MI), which priced last month at 275 basis points over midswaps, even though at the time Atlantia was rated A3 by Moody's Investors Service Inc. and A- by Standard & Poor's Corp. and Fitch Ratings, one notch above Luxottica's debut credit rating.
The luxury-goods company received a BBB+ rating from S&P earlier this month, having previously been unrated.
"Luxottica is an Italian name, but their exposure in Italy is not as big as Atlantia's," said a syndicate banker working on the deal. "About 95% of Luxottica's turnover is outside Italy, so you can't really compare the two," the banker added, pointing out that the deal priced according to where Luxottica is trading in the secondary market.
"Its secondary spread has tightened heavily in the last week or so since receiving its new credit rating and is now trading at around 155 basis points," the syndicate banker said.
This is wide compared to its core peers, but investors still regard it as a strong name, said another banker working on the deal.
Luxottica, which counts Ray-Ban and Oakley among its designer brand range, is an infrequent issuer, with just one bond currently outstanding, according to Tradeweb. That was priced at EUR500 million, five-year deal back in November 2010 at 200 basis points over midswaps.
"It's a rare name, but the whole luxury-goods sector is really attractive for investors," the syndicate banker said.
It is the fourth Italian non-financial corporate deal so far this year, following sales from Atlantia, Eni SpA (ENI.MI) and Terna SpA (TRN.MI), though it is the first to price inside 200 basis points. It follows the tightening trend seen in Italian government bond yields, with the 10-year now trading at 4.88% having yielded more than 7% in January, according to Tradeweb.
Bank of America Merrill Lynch, Credit Agricole SA, Citigroup Inc., Royal Bank of Scotland Group PLC and UniCredit AG were the lead managers on the Luxottica deal.
-By Ben Edwards, Dow Jones Newswires; 44-20-7842-9287; email@example.com