Spain's Telefonica unveiled plans for the continent's largest telecom bond sale in three years, putting the focus firmly on the primary market in Europe on Wednesday.
The Spanish phone operator was joined by a string of other corporates planning deals, including Germany's Porsche and health care company Fresenius, while the asset-backed market was gearing up for the first big UK mortgage bond of the year.
Investor meetings for the 5.46 billion euro ($6.59 billion) equivalent Telefonica transaction, which will feature euro and sterling tranches, are scheduled to take place next week. The deal will help refinance Telefonica's 17.7 billion pound take-over of British mobile phone operator O2.
The market welcomed the news, with some relieved that the deal is not as large as expected.
"Spreads are rallying because we were expecting more supply from Telefonica. They have a couple of years on the loan, so we may not necessarily see more bonds from them this year," said a telecoms trader in London.
Telefonica's 5.875 percent bond due February 2033 was bid 5 basis points tighter on the day at 141 basis points over government securities. Telefonica aims to sell about 4 billion euros ($4.83 billion) of 5- and 10-year euro bonds, and 1 billion pounds ($1.76 billion) of 12-year or longer and 20-year or longer sterling bonds, a banker familiar with the sale said.
ABN Amro, Barclays Capital, BBVA and SG CIB are the bookrunners on the euro tranches, and Barclays Capital, BNP Paribas and Royal Bank of Scotland are the bookrunners for the sterling tranches.
The European asset-backed market also saw signs of life on Wednesday as British mortgage lender Northern Rock said it plans to sell a 4.0 billion pound ($7.02 billion) equivalent UK home loan backed bond via Barclays Capital, Deutsche Bank and Merrill Lynch. Roadshows commence next week.
Elsewhere, sports car maker Porsche said it plans to sell euro and dollar bonds, allowing the rare borrower more financial flexibility and to take advantage of low interest rates to refinance an existing bond.
The one-billion-euro plus deal will include at least 500 million euros each of 5- and 10-year euro bonds, as well as a US dollar hybrid bond. Merrill Lynch is global co-ordinator for the deals, with Barclays Capital and HVB also joint bookrunners on the euro bonds.
In the high yield market, Germany's Fresenius and British chemicals company Ineos are both planning roadshows.
Fresenius said it plans to sell a 1.0 billion euro bond this month to help finance its take-over of hospital chain Helios Kliniken and to fund the buyback of an old bond.
The company said it had mandated CSFB and Morgan Stanley as joint bookrunners and lead managers, and Dresdner as joint lead manager.
A roadshow for the new Fresenius bond will take place next week, with pricing due by the end of that week, a banking source said.
And Ineos will begin roadshows for a high-yield bond to refinance a 3.105 billion euro bridge loan on January 16, a banking source told Reuters LPC on Wednesday.
The roadshow will run for two weeks, the source said.
The broad market was in positive territory. The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 45.2 basis points more than similarly-dated government bonds at 1604 GMT, 0.7 basis point less on the day.
US auto bonds saw good demand on Wednesday, a trader in London said, although there was little tangible news to drive the interest.
"Ford and GM have been going tighter all day," he said. "It may just be that there's more capacity in the market now than there was in December, when a lot of traders were out."
General Motors Acceptance Corp (GMAC) bonds were around 0.5 percentage points higher across the curve, the trader said. US auto sales for December are due for release later on Wednesday, although the trader branded them as largely "irrelevant" for the bond market.
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