Bloomberg News

BAT Leads Bond Sales Before Finance Ministers Meet on Greece Aid

November 12, 2012

British American Tobacco Plc (BATS) sold its first bonds in euros for a year as European credit risk was little changed before the region’s finance ministers meet to discuss Greek aid.

Europe’s largest cigarette maker priced 750 million euros ($953 million) of securities due January 2023 to yield 75 basis points more than the midswaps rate, according to data compiled by Bloomberg, tighter than initial guidance of 80 to 85 basis points. The Markit iTraxx Crossover Index of credit-default swaps linked to the debt of 50 mostly junk-rated companies rose 2.3 basis points to 536 at 4:28 p.m. in London, having earlier fallen as much as 4.5 basis points.

BAT’s sale is the company’s first in the common currency since it raised 600 million euros of 10-year bonds on Nov. 9, 2011 at a yield of 123 basis points more than swaps, data compiled by Bloomberg show. Europe’s finance ministers are seeking to prevent a 5 billion-euro Greek bill redemption on Nov. 16 from triggering an accidental default.

“There’s still a lot of money around waiting to be allocated, ” said Oliver Woyda, a money manager at Deka Investment GmbH in Frankfurt.

Will Hill, a spokesman for BAT in London said the company was selling bonds to refinance upcoming debt maturities and for general corporate purposes. “We have a number of refinancing requirements in 2013, including a euro bond redemption in July, and have decided to take advantage of favourable market conditions,” he said in an e-mailed statement.

IBM Deal

Also in capital markets today, International Business Machines Corp. (IBM:US) priced 1 billion euros of seven-year bonds at 20 basis points more than swaps, the tight end of an initially- marketed range of 20 to 25. It was the New York-based company’s first sale in the currency in four years, Bloomberg data show.

In derivatives markets, the Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies rose 0.25 basis points to 132, according to prices compiled by Bloomberg. Bank credit risk also rose, with the Markit iTraxx Financial Index of swaps tied to the senior debt of 25 banks and insurers up three basis points at 182.

Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A basis point on a contract protecting 10 million euros of debt for five years is equivalent to 1,000 euros a year.

To contact the reporter on this story: Hannah Benjamin in London at hbenjamin1@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net


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