Bloomberg News

Sausage Bonds Meet Trucker Debt as Haven Spreads: Nordic Credit

October 26, 2012

DSV Chief Executive Officer Jens Bjoern Andersen

DSV plans to sell bonds “within quarters rather than years,” Chief Executive Officer Jens Bjoern Andersen said yesterday. Source: DSV via Bloomberg

Investor demand for debt sold out of Scandinavia is prompting some of the region’s biggest companies to issue bonds for the first time.

DSV A/S (DSV), the biggest Nordic truck company, plans to tap capital markets in its first ever bond sale, while Danish Crown A/S, the world’s largest pork exporter, is talking to investors ahead of its first debt sale in eight years.

DSV plans to sell bonds “within quarters rather than years,” Chief Executive Officer Jens Bjoern Andersen said in a phone interview yesterday. The Broendby, Denmark-based company is “relatively far in the process” of arranging a sale, the CEO said, declining to comment on the planned amount or on the identity of its advisors.

Denmark, a European Union member that has opted out of the euro, has emerged as a haven from the region’s economic crisis thanks to a debt burden that’s less than half the currency bloc’s average. While investors initially sought refuge in Danish government bonds, appetite has spread to mortgage and corporate debt, prompting a number of companies to test the market with new sales.

Denmark’s government pays about 21 basis points less than Germany to borrow over 10 years while its benchmark two-year note yields only 0.01 percent, or eight basis points less than bunds. That’s dragged down yields on corporate bonds, with the yield on Carlsberg Breweries A/S’ 3.375 percent note due 2017, dropping to 1.77 percent yesterday, compared with 3.48 percent in the beginning of the year.

‘New Black’

Thomas Hovard, chief credit analyst at Denmark’s biggest lender Danske Bank A/S, predicted last month that more Danish companies will issue bonds, describing the corporate debt market as “the new black.”

Corporate issuance is also being driven by bank deleveraging, as the financial industry struggles to meet stricter capital requirements. Companies are also trying to wean themselves off bank loans in case lenders cut their credit supply to address capital or liquidity shortfalls, Hovard said.

Danish banks in September increased rates on new loans to businesses to the highest in six months, according to central bank statistics released yesterday. Margins rose to 2.5 percent from a low of 1.7 percent in July. Banks charged 2.8 percent in March. Rates on outstanding loans were unchanged from August at 4.3 percent.

Pork Bonds

“We don’t have any problems with our banks, but it’s always a good idea to be more diversified in the funding,” Andersen, 46, said. “The advantage of bonds is that the funding runs a longer time. So we would get longer money and also presumably cheaper money, because we wouldn’t do this if it wasn’t helpful to the company.”

Danish non-financial companies have sold bonds for 33.6 billion kroner ($5.82 billion) so far this year, according to data compiled by Povl Bak-Jensen, a director at the debt capital markets unit of Nordea Bank AB in Copenhagen. That compares with 18.3 billion kroner in all of 2011.

Danish Crown said last month it plans to issue its first krone bond since 2004. The Randers, Denmark-based company said today investors showed “large” interest in the note, which will be listed on Nasdaq OMX Copenhagen’s new exchange for company debt, the First North Bond Market. Danish Crown will raise as much as 750 million kroner, it said.

A.P. Moeller-Maersk A/S (MAERSKB), the world’s biggest shipping line, said in May it will accelerate bond sales after the Copenhagen- based company sold 750 million euros ($973 million) of debt on Aug. 21.

‘We’re Comfortable’

DSV, founded by 10 truckers in 1976, has expanded through acquisitions to become Denmark’s fifth-biggest listed company by revenue. Its debt peaked at 9.54 billion kroner at the end of 2008, when it bought Brussels-based ABX Logistics Worldwide SA, its second-largest purchase to date. The company said yesterday it had net debt of 6.48 billion kroner at the end of September, down 3.5 percent from three months earlier.

“We’re comfortable with our debt,” Andersen said.

DSV said Oct. 1 it agreed to buy Dubai-based Swift Freight for an undisclosed amount to boost its presence in Africa. Andersen said that DSV will accelerate acquisitions over the next year as takeover targets become more affordable.

“We’re looking at medium and small-sized targets, so we will probably be able to finance the acquisitions with operational income,” Andersen said. “We don’t expect to depend on going to the markets for acquisition funding.”

Takeover Plans

DSV is mainly looking for acquisitions for its air and sea freight division and Andersen favors geographical markets “everywhere besides Europe,” with South America topping the list, he said.

DSV yesterday reported third-quarter net income of 435 million kroner, beating the average estimate of 412 million kroner in a Bloomberg survey of 10 analysts. The company had cash of 429 million kroner at the end of September compared with 405 million kroner a year earlier.

To contact the reporter on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net

To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net


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