Daimler AG (DAI), the maker of Mercedes- Benz cars and trucks, is the company whose debt is most frequently linked by structured notes this year.
Banks led by Landesbank Baden-Wuerttemberg and DZ Bank AG sold $518 million of securities tied to the world’s third- largest maker of luxury vehicles, data compiled by Bloomberg show. That compares with $442 million of issuance linked to steel company ArcelorMittal (MT), while Spanish phone operator Telefonica SA (TEF) was referenced by $130 million of securities.
Daimler’s earnings of 2.24 billion euros ($2.72 billion) before interest and taxes in the second quarter and its investment-grade rating are key factors in the company’s appeal, said Nordine Farsi, head of structured credit trading at LBBW in London. Daimler is ranked A3 by Moody’s Investors Service and an equivalent A- by Standard & Poor’s.
The company faces the “challenge” of slowing global economic growth, Daimler Chief Executive Officer Dieter Zetsche said yesterday, with auto demand in Europe poised to decline for the fifth straight year.
Credit-linked notes are securities that use derivatives tied to the performance of a company or country’s debt and offer higher yields and maturities that may not be available in the bond market. Investors suffer losses if there’s a default for either the bank issuing the note or the reference entity.
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