Europe's corporate bond market celebrated firsts on Thursday, as UK airports operator BAA sold its debut euro-denominated bond and Corus showed a maiden first half profit and revived a bond sale.
British airports operator BAA Plc sold a 750 million euro 10-year bond, offering investors a yield at the low end of initial price guidance, lead managers for the deal said.
The bond from Europe's largest airports operator was priced to yield 37 basis points over mid-swaps - at the lower end of price guidance of 37 to 40 basis points over.
Demand for the issue was 4.5 billion euros, a syndicate official at one of the banks managing the sale said.
"There has been an enormous amount of accounts trying to top up allocations. It's about two basis points tighter," said a trader in London late on Thursday.
The bond pays a coupon of 4.5 percent and had an issue and reoffer price of 99.55 percent of face value. BAA operates seven British airports including London's Heathrow, Gatwick and Stansted. It makes money from airline take-off and landing fees, car parks, retail rent, airport advertising and its duty-free shops.
In the wider market, spreads continued to grind tighter although traders said liquidity was thin.
The FTSE Euro Corporate Bond Index showed investment-grade corporate bonds in euros yielding an average 44.7 basis points more than similarly dated government bonds at 1505 GMT, 0.2 basis points less on the day.
In the high-yield market, the cost of insuring against a default by Anglo-Dutch Corus Group Plc fell after the company resurrected plans to issue 500 million euros ($613 million) of senior notes due 2011 and tender for its 400 million euros of 5.375 percent bonds due 2006.
Corus had originally planned to issue the bond in May, but scrapped the sale as a glut of supply overwhelmed the European high-yield market.
The company also swung into the black for the first time in its 5-year history, reporting a pretax profit of 163 million pounds for the six months to the end of June.
Five-year credit default swaps on Corus fell 30 basis points to 315 basis points. The price means it costs 315,000 euros a year to insure 10 million euros of debt against default.
Roadshows for the new bond will begin on Monday with pricing expected at the end of the week.
German auto repair chain ATU will also begin marketing a 150 million euro high-yield bond on Monday, a banking source said.
The issue is expected to have a 10-year maturity and the call structure is still being finalised, the source said. Proceeds from the deal will part finance the buyout of ATU by US equity house Kohlberg Kravis Robert from Doughty Hanson, which acquired the company in 2002.
Colt Telecom default swaps fell after the company said it would redeem convertible notes worth 600 million marks and 368 million euros early, in a vote of confidence about the future.
The 2 percent Deutsche Mark notes are due in 2005 and the 2 percent euro notes in 2006. By redeeming the notes early Colt will save approximately 18 million pounds in net interest over the next two years, it said.