Bloomberg News

Lear Sells $325 Million of Bonds; Credit Swaps in U.S. Increase

March 11, 2014

Auto-parts maker Lear Corp. (LEA:US), which completed its bankruptcy reorganization in 2009, sold $325 million of bonds to help refinance debt. A measure of U.S. corporate credit risk rose.

Lear issued 5.375 percent, 10-year notes to yield 261 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. The securities are rated Ba2 by Moody’s Investors Service.

The vehicle electronics manufacturer intends to use the proceeds to pay down $280 million of 7.875 percent notes maturing in 2018 and partially redeem its $280 million of 8.125 percent debentures due in 2020, according to a statement from the Southfield, Michigan-based company. Lear last issued bonds in January 2013, selling $500 million of 4.75 percent, 10-year notes, according to data compiled by Bloomberg.

“They were put on outlook positive by Moody’s in January, kind of reflective of a good year that Lear had in 2013,” Anthony Valeri, a market strategist in San Diego with LPL Financial Corp., said in a telephone interview. “This transaction is more along those lines.”

The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark used to hedge against losses or to speculate on creditworthiness, increased 0.6 basis point to 64 basis points as of 4:02 p.m. in New York, according to prices compiled by Bloomberg. The measure was poised to close at the highest level in more than a week.

Verizon Active

The swaps gauge typically rises as investor confidence deteriorates and falls as it improves. The contracts pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

Bonds of Verizon Communications Inc. (VZ:US) are the second most actively traded dollar-denominated corporate securities by dealers today, accounting for 5.3 percent of the volume of dealer trades of $1 million or more as of 4:03 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The second-largest U.S. phone company, whose $49 billion bond sale six months ago was the largest ever, issued $4.5 billion of debt in five parts yesterday to help fund a tender offer.

The risk premium on the Markit CDX North American High Yield Index, tied to the debt of 100 speculative-grade companies, widened 2.1 basis points to 317.4, Bloomberg prices show. Speculative-grade bonds are rated below Baa3 by Moody’s and less than BBB- at Standard & Poor’s. A basis point is 0.01 percentage point.

The extra yield investors demand to hold investment-grade corporate bonds rather than government debt rose 0.6 basis point to 99.5, Bloomberg data show.

To contact the reporter on this story: Jessica Summers in New York at jsummers20@bloomberg.net

To contact the editors responsible for this story: Shannon D. Harrington at sharrington6@bloomberg.net Richard Bravo, John Parry


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Companies Mentioned

  • LEA
    (Lear Corp)
    • $99.13 USD
    • 3.35
    • 3.38%
  • VZ
    (Verizon Communications Inc)
    • $51.29 USD
    • 0.24
    • 0.47%
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