-- 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
suggesting renewed investor interest in the country following the
European Central Bank's announcement of plans to buy government
bonds from embattled euro-zone countries.
The 750 million euro ($970 million) issue marked the first foray
into the bond market by this country's companies in 18 months and
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 bond will
carry a 5.75% coupon.
The strength of demand on the deal acts as further evidence that
the ECB's plan to help trim borrowing costs for weaker euro-zone
states has soothed investors' nerves and helped companies in
bailed-out countries 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 could buy into EDP's bond bought 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 35 basis points tighter Friday at 455 basis points,
representing the cheapest debt-insurance costs since the start of
August last year.
Investors' assessment of Portugal's risk has substantially
changed lately. The cost of insuring Portuguese sovereign debt
against default for five years closed the day in Europe Friday 0.38
percentage points lower on the day, and is almost a half of what it
was at the beginning of August. It now costs an average of $438,000
a year to insure $10 million of Portuguese debt against default for
five years, against the $829,000 of August 1.
Write to Serena Ruffoni at serena.ruffoni@dowjones.com
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