Microsoft Debuts Euro Bond

LVMH, Nestle also issue euro-denominated bonds to take advantage of record-low rates

Microsoft Corp., the world’s largest software maker, is selling bonds in euros for the first time, joining LVMH Moet Hennessy Louis Vuitton SA and Nestle SA in taking advantage of record-low borrowing costs.

Microsoft is raising 550 million euros ($719 million) from 20-year notes, according to a person familiar with the transaction. French luxury goods maker LVMH is selling its first euro bonds in two years, while Nestle, the world’s biggest food company, is marketing its first securities in the currency since October.

Microsoft’s deal will be priced to yield about 60 basis points more than swaps, according to the person who asked not to be identified because the details are private. Photographer: Stuart Isett/Bloomberg

It’s the busiest day in six weeks for issuance in Europe, as non-financial companies sell 3.9 billion euros of bonds, according to data compiled by Bloomberg. The average yield investors demand to hold investment-grade corporate bonds in euros has fallen to a record 1.84 percent, Bank of America Merrill Lynch data show.

“People are desperate for yield and there is not much to find in the government market so they will jump into corporate bonds,” said Thomas Kristiansson, head of credit fixed income at SEB AB in Stockholm. “These deals are coming tight.”

Microsoft’s deal will be priced to yield about 60 basis points more than swaps, according to the person who asked not to be identified because the details are private. Bank of America and Royal Bank of Scotland Group Plc are the active bookrunners on the deal for the Redmond, Washington-based company, which has $14.3 billion of bonds outstanding, according to Bloomberg data.

LVMH is selling 500 million euros of notes due November 2019 that will be priced to yield 32 basis points more than the mid-swap rate. The Paris-based company last sold euro-denominated bonds in March 2011, Bloomberg data show.

Vevey, Switzerland-based Nestleis raising 500 million euros with bonds maturing May 2020 that will be priced to yield 17 basis points more than mid-swaps. The notes may be rated Aa2 by Moody’s Investors Service.

General Electric Co., the largest maker of jet engines, is marketing a two-part deal, selling 750 million euros of floating-rate notes due May 2016 and 1.25 billion euros of fixed notes maturing May 2017, a person with knowledge of that transaction said. The Fairfield, Connecticut-based company’s three-year notes will yield 45 basis points more than three-month Euribor and its four-year securities will yield 50 basis points more than swaps.

The cost of insuring against losses on corporate debt rose for the first time in five days. The Markit iTraxx EuropeIndex of credit-default swaps linked to 125 investment grade companies climbed one basis point to 108, after falling to the lowest level in more than a month yesterday.

Medi-Partenaires SAS is marketing a debut bond in the high- yield market. The French private hospital operator is selling 385 million euros of senior secured bonds due 2020 that may be called by the company after three years, according to a person familiar with the matter.

The notes may be rated B3 by Moody’s, six steps below investment grade, according to the person who asked not to be identified because they’re not authorized to speak about it. The Paris-based company will use the proceeds to refinance a portion of its senior and subordinated shareholder funding and to pursue acquisitions, it said in a statement.

 

Bloomberg News

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