LONDON, March 25 (IFR) - Banque PSA, the financial arm of
loss-making French car maker PSA Peugeot Citroen, began
marketing its first bond guaranteed by the Republic of France on
Monday and has already attracted over EUR2bn of orders.
The transaction, which will be no greater than EUR1.2bn,
marks the company's first foray into the bond market since
receiving a EUR7bn state loan guarantee late last year,
generating EUR1bn in a share issue and raising a further EUR2bn
by selling assets.
Despite Peugeot posting its biggest-ever full-year loss in
mid-February, and weakening prospects for a European market
recovery, observers said that the sovereign guarantee signifies
a new chapter for the company as a debt issuer.
"The guarantee will open the credit up to a more diversified
investor base and I expect that especially investors looking for
low-risk paper will be happy to put their money in the name,"
one syndicate banker away from the deal said.
Banque PSA started marketing the three-year bonds, which
will be rated Aa1 by Moody's and AA+ by Standard & Poor's, in
the OAT 3.25% April 2016 +30bp area, and has since set official
guidance at +25/28bp.
The notes will price later in the day via BNP Paribas,
Credit Agricole, Citi, HSBC, Natixis, RBS, Societe Generale and
UniCredit as active leads, and Bank of America Merrill Lynch,
Santander and Credit Mutuel as passive leads.
AN UPHILL BATTLE
Banque PSA was last in the public unsecured bond market in
June last year when it printed a EUR600m 4.875% September 2015
bond at mid-swaps +385bp. Those bonds were rated Baa2/BBB and
have tightened significantly since then, bid at swaps +326bp on
Monday, pre-announcement of the new deal.
The issuer is also likely to have been encouraged to come to
the market by strong demand for a EUR1bn five-year bond issued
by parent company Peugeot in late February.
The deal attracted a EUR4.5bn order book, and priced at a
yield of 7.50%, equivalent to 657.4bp over mid swaps. It has
since tightened to around 620bp over.
The success of that deal shows that investors have largely
shrugged off a downgrade by S&P to both PSA Peugeot Citroen and
its financial arm last month. The rating agency pushed Peugeot
further into junk territory at BB-, and Banque PSA to BB+.
Moody's rates Banque PSA at the Baa3, the lowest
The downgrade, the agency said, was prompted by the
record-loss reported for the year.
The ratings agency, which previously downgraded Peugeot in
July, also said it was keeping a negative outlook on the
automaker's debt, which it said reflected a view that Peugeot's
weak performance in a continuously stressed market environment
and ongoing challenges could hamper its plans to restore
breakeven, in free operating cash flow terms, by the end of
Peugeot's five-year CDS currently trades at around 691bp.
Renault has had to face similar domestic macroeconomic headwinds
but its five-year CDS trades at around 255bp.
(Reporting By Josie Cox, IFR Markets; editing by Alex Chambers
and Natalie Harrison)