Nov. 28 (Bloomberg) -- French companies led by Carrefour SA and Alstom SA are leading a record pace of refinancing as Europe’s spreading sovereign crisis endangers France’s top credit rating.
The borrowers are pushing the amount of French loans to $92 billion this year, compared with $49 billion a year earlier, according to data compiled by Bloomberg. Moody’s Investors said last month France’s debt metrics “are now among the weakest” in Europe’s AAA club, while Standard & Poor’s said France might be downgraded in a stressed economic scenario.
Borrowers are stepping up requests to renew credit lines before lending rates increase further, according to Societe Generale SA. The average premium to benchmark rates paid by high-grade issuers in Europe is 91.6 basis points, up from 84.4 basis points between January and July, the data show.
“Loan pricing will continue to rise for the next six months at least,” said Damien Lamoril, head of EMEA loan syndicate at Societe Generale in Paris. “Many borrowers want to secure refinancing early instead of bearing the risk of being surprised by market volatility. This is the busiest November the market has seen since 2007.”
Investment-grade non-financial companies in Europe, the Middle East and Africa need to refinance more than $1.2 trillion of debt in the next four years, up almost 20 percent from a year ago, with the most debt due in 2012 to 2015 from energy, auto and telecommunications firms, Moody’s said in a report on Nov. 9. About 32 percent of it is bank debt.
France has the biggest debt burden of the top-rated euro nations, at 85 percent of gross domestic product. Its financial institutions also have the largest debt holdings in the five crisis-hit countries, at 681 billion euros ($910 billion) as of June, according to the Bank for International Settlements.
“French borrowers are refinancing ahead of schedule as a prudent measure in times of crisis,” said Sean Malone, head of loan market origination at Royal Bank of Scotland Group Plc in London. “Earlier in the year there was a potential cost benefit to delaying refinancing -- now the opposite is true.”
Carrefour, the world’s second-biggest retailer, got a 1.5 billion-euro credit line last week to replace a facility of the same amount signed in 2005, lenders said in a statement. The Boulogne-Billancourt, France-based supermarket chain offered to pay an initial interest of 75 basis points more than the euro interbank offered rate to use the facility, compared with 60 basis points it agreed to pay to draw funds from a five-year credit line signed last year, according to Bloomberg data.
Alstom, the third-largest power-equipment maker, is seeking a 1 billion-euro credit line to refinance a deal expiring next year, according to three people with knowledge of the situation. The five-year, self-arranged revolving credit will replace a facility signed in 2007, the people said.
LVMH Moet Hennessy Louis Vuitton SA, the world’s largest maker of luxury goods, is seeking a 1.75 billion-euro credit line for at least five years to renew existing facilities, according to Bloomberg data. The Paris-based maker of Celine handbags and TAG Heuer watches is proposing interest of about 40 basis points more than Euribor to draw the funds if it’s rated A, Bloomberg data show.
Banque PSA, PSA Peugeot Citroen’s banking unit, is seeking a 1.75 billion-euro three-year credit line to replace a 2 billion-euro facility signed in 2007 and due in June, according to Bloomberg data.
Companies in Europe have 867 billion euros of bank loans due by the end of 2013, with French firms’ obligations of 136 billion euros the second-largest after U.K. peers, according to Bloomberg data.
“We are encouraging all borrowers to focus on their refinancing plans as early as possible,” Malone said. “The market is difficult and likely to become more so.”
--Editors: Cecile Gutscher, Andrew Reierson
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