Bloomberg News

Nokia Siemens Plans Bonds as Credit Risk Holds Near 18-Month Low

January 21, 2013

Nokia Siemens Networks is said to be planning its first bond sale, tapping investor demand for high- yield assets as the risk of owning the debt holds near the lowest since July 2011.

The phone-equipment venture of Nokia Oyj (NOK1V) and Siemens AG (SIE), which isn’t rated, may sell as much as 750 million euros ($1 billion) of bonds, according to a person familiar with the plan. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield ratings fell seven basis points to 416, just above the low of 414 reached Jan. 18, data compiled by Bloomberg show.

“Nokia Siemens’s deal isn’t surprising given the depth of demand and low yields out there,” said Stuart Stanley, a fund manager at Invesco Asset Management Ltd. in London, who oversees $3 billion of high-yield bonds. “Technology is a difficult sector for credit investors as things can change very quickly. On the other hand, it is certainly a global and significant company.”

European companies sold 3.5 billion euros of speculative- grade debt in 2013 as of last week, more than 10 times the amount raised in the same period last year, data compiled by Bloomberg show. Borrowers are taking advantage of demand for higher-yielding investments as the European Central Bank holds interest rates at historic lows to stimulate recovery.

Junk bonds yield 3.25 percentage points more than investment-grade debt, Bank of America Merrill Lynch data show. That compares with a peak of 20.7 in March 2009.

Junk Sales

A bond sale from Nokia Siemens still needs to be approved by the company’s board, said the person familiar with the company’s plan, who asked not to be named because they’re not authorized to speak about it.

A Nokia Siemens high-yield bond offering would be the second-largest in euros this year. On January 9, Italian business information services company, Cerved Group SpA, issued a three-part deal totaling 780 million euros, Bloomberg data show.

Nokia in Espoo, Finland is rated Ba3 by Moody’s Investors Service and BB- by Standard & Poor’s and Fitch Ratings, three levels below investment-grade status.

Elsewhere in bond markets, Spanish utility Iberdrola SA (IBE) sold 1 billion euros of eight-year bonds, its longest-dated sale since September 2010, Bloomberg data show. Italy’s Banco Popolare SC issued 1.25 billion euros of bonds in its first senior, unsecured benchmark offering in the currency since 2011.

Belfius Covereds

Belgium’s Belfius Bank NV offered 500 million euros of 10- year covered bonds, its second sale of the loan-backed securities. It opened the market for Belgian covered bonds in November, data compiled by Bloomberg show.

The Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies fell two basis points to 102. The Markit iTraxx Financial Index of credit-default swaps on the senior debt of banks and insurers dropped four basis points to 132 basis points.

A basis point on a credit-default swap contract protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year. 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.

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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