The cost of insuring Telecom Italia's debt against default rose on Wednesday, and its bonds fell, on a report that private equity giant Blackstone might be interested in taking a minority stake.
Italian news agency ANSA quoted Blackstone Chairman Tony James as saying Telecom Italia was "an excellent company with a great market position. Yes, we're interested."
That prompted shares in the company to hit a 7-month high, but raised bondholder fears about a deterioration in the credit quality of TI - one of Europe's biggest corporate borrowers, with 39.5 billion of debt at the end of September.
Five-year credit default swaps on Telecom Italia rose 3 basis points to a 64.5 basis point mid-price, a trader in London said, while the spread on its 2055 bond widened 8 basis points, to be bid at 228 basis points over equivalent government debt.
"Blackstone, via Deutsche Telekom in the past, have shown their willingness to take minority interests in companies," the trader said. "They have been rumoured to have shown interest in Telecom Italia Mobile (TIM) in the past, so this could be an indirect way to do that."
"I don't see any decision that's going to be made that's not going to be primarily beneficial to shareholders." ANSA said James specified Blackstone could be interested in a minority stake in Telecom Italia, but would never buy the company without a group of Italian shareholders as partners.
Default swaps on TI's British peer, BT, also rose, adding 3 basis points to 42.5 basis points, the trader added, on concerns it could increase leverage through a securitisation while leaving existing unsecured debt outstanding. That price means it costs 42,500 euros a year to insure 10 million euros of BT debt against default.
In the wider market, the iTraxx Crossover index, made up of mostly "junk"-rated credits, reversed an earlier 3-basis-point tightening to stand 1 basis point wider at 237.5 basis points, while the investment-grade Europe index widened 0.25 basis points to a 24.125 basis point mid-price.
"The credit market as a whole is feeling a little bit weaker," an index trader said. "Liquidity is drying up going into Thanksgiving - it's a half-day in US bond markets today - and people are just pushing it around."
Worries of potential buyout interest also knocked Vinci's hybrid bond, at the same time as the French construction firm's shares hit a record high, with a hybrid bond trader saying its spread widened 10 basis points to 280 basis points over equivalent government debt.
In the primary market, French wine and spirits group Pernod Ricard was set to sell a larger-than-expected 850 million euros of bonds, an official at one of the lead managers said. Pernod will sell a 300 million euro, 4-1/2-year floating-rate note yielding 53 basis points over 3-month Euribor, and a 550 million euro, 7-year bond yielding 80 basis points over mid-swaps, the official said.
The deal, to refinance bank debt, comes after the two biggest rating agencies shifted their stance on Pernod, praising the speed and low cost with which Pernod has integrated Britain's Allied Domecq after buying it last year. The deal is Pernod's "first-ever long-term debt issue," according to Standard & Poor's - although several Allied bonds remain outstanding.
And Portuguese toll-road operator Brisa Auto-Estradas de Portugal S.A. sold a 600 million euro 10-year bond, priced to yield 62 basis points over mid-swaps, a lead manager said.
Comments
Comments are closed.