Portugal's downgrade to junk may stifle corporate bond sales in Europe, killing off a mini- revival in issuance spurred by investor optimism about Greece's efforts to avoid default.
“The primary window has almost slammed shut just as spectacularly as it had flung open,” said Suki Mann, senior credit strategist at Societe Generale SA in London.
Enel SpA, Italy's largest power operator, and Fiat SpA led 5.4 billion euros ($7.7 billion) of company bond sales in Europe this week, the biggest round of issuance by non-financial borrowers since May, according to data compiled by Bloomberg. Notes sold by Enel and Fiat fell in their first day of trading today, while two issuers pulled deals.
Corporate bond sales plunged to 23 billion euros in June, a third of the amount raised in May, amid investor concern that Greece's debt crisis would spread through Europe. Portugal, which followed Greece and Ireland in seeking a bailout for its budget shortfall, was cut four levels to Ba2 by Moody's Investors Service yesterday.
Enel, Fiat
Rome-based Enel raised 1.75 billion euros from a sale of bonds due in six and 10 years, data compiled by Bloomberg show. The 750 million euros of longer-dated notes fell to 99.35 cents on the euro after being sold at 99.47, BNP Paribas SA prices on Bloomberg show.
Fiat in Turin, Italy, sold 1.5 billion euros of three- and seven-year bonds. The seven-year securities dropped to 99.38 cents on the euro from their issue price of 100, BNP Paribas prices show.
“Enel and Fiat sit in the peripherals category and so are under pressure for obvious reasons,” SocGen's Mann said.
Portugal may be shut out of financial markets beyond 2013 and possibly need a second bailout, Moody's said. The country's government has to implement an austerity plan as a condition of the 78 billion-euro aid package from the European Union and the International Monetary Fund.
Portugal's bonds slid after the Moody's downgrade, sending 10-year yields to a record. Other debt-strapped euro nations fell with Spanish securities dropping for a third day and Italian 10-year yields jumping to the highest since 2008.
Bayerische Landesbank, a Munich-based lender, postponed a sale of 10-year covered bonds, according to a company spokesman. The delay followed a Moody's report published today that put covered bonds of German Landesbanks, including BayernLB, on review for downgrade. Covered bonds are securities backed by mortgages or public-sector loans and guaranteed by the issuer.
Toll-road operator Autoroutes du Sud de la France pulled its 500 million-euro sale of seven-year bonds because of worsening market conditions today, according to two people with knowledge of the matter. A spokesman couldn't immediately be reached for comment.
Bloomberg News
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